Win with LEAN Manufacturing & Service firms

 JWI 550 Operations Management, week7 summary, 2/24/13

This week I learned what it takes to win with LEAN principles in manufacturing as well as service firms. It all begins with the specification of the goal by the customer, mapping the value stream inside the firm, making value creating steps flow - fully leveraging the DBR (Drum-Buffer-Rope) concept of TOC (Theory of Constraint), pushing innovative products through supply chain while allowing customers to pull the supply chain for standard products, and continuously driving change within the firm to get closer and closer to perfection in terms of QCDTV (Quality, Cost, Delivery, Teamwork, client value).

I enjoyed meshing the LEAN principles (Womack & Jones, 2002) with Theory of Constraint approach in THE GOAL (Goldratt, Cox, 2011). Together these concepts equip me with a powerful approach to cut through "conflict clouds" in complex systems and find leverage points to continuously improve productivity, throughput, Turn Around Times, on-time-shipment and ultimately client satisfaction.

never really thought operations management can be so exciting...wow !
Dr DP

THE GOAL (Goldratt & Cox, 2012) is an excellent novel woven around the five core principles of lean manufacturing (Womack & Jones, 2003) including:

1. Specify Value - THE GOAL
Externally:
The goal is to always begin with the customer definition of value
Use dedicated product teams in direct dialog with customers to detect shifting customer demand.
Internally:
The goal of the firm is to make money
Increase Throughput while simultaneously decreasing Inventory & Operating expense
Inspect for value at every step of production and align reward system       

2. Identify entire Value stream
This is comprised of problem solving, information management and physical transformation               
(i) Build systems to get "first time right"
(ii) Systematically eliminate non-value add activities in entire value stream
(iii) Reduce waste: overproduction (doing more than necessary), waiting, wasted transport (motion), inventory(excess parts through out the system ie. fat), under utilized people (not leveraging people's unique abilities and realizing people's full potential), defects, repair/rework
(iv) Continually reduce effort, time, cost & space requirements to minimize travel distance
(v) Get the team involved
- develop partnerships with suppliers & educate them about customer needs   
- develop and empower employees to take action

3. Make value creating steps Flow
(i) Identify the system's constraints ie bottlenecks to flow and use DBR (Drum, Buffer, Rope) model to achieve global optimization
Make the entire factory march to the Drum beat of the bottleneck
Use a buffer before the bottleneck to ensure operation at full capacity
Release materials into the system at a rate no greater than that the bottleneck can handle
(ii) Decide how to exploit the bottleneck
- make the most of the bottleneck; prioritize only critical work through it; get support & off load work; run at full capacity
- beware of dependent events & statistical fluctuations
- use small batch sizes & JIT to eliminate inventory
(iii) Subordinate all else to the bottleneck
(iv) Elevate the importance of the bottleneck and give it enterprise-wide visibility- increase capacity; find a way to fill it
(v) Beware of new inertia settling in and causing a new bottleneck

4. Let customers Pull value from enterprise
Let customers pull the enterprise's supply chain for commodities and relatively standardized products. 
Push innovative products to customers as customers may not yet know what they really need eg. innovative iphone.

5. Perfection
Be on guard to detect new bottlenecks, traveling bottlenecks
Key Questions to ask continually are:
(i) What to change ?
(ii) What to change to ?
(iii) How to cause the change ?

Vast majority of lean principles described in THE GOAL and explained above apply equally well to manufacturing and service firms. Beginning with the customer's definition of value, for instance, is a golden rule for all types of businesses. Firms that take their eyes off of the customer spell their own doom sooner or later as IBM found out the hard way in 1993 when barreling towards a near-death experience.

The concept of using a buffer to keep a bottleneck fully loaded is more applicable in the manufacturing space. This I would consider as an example of a difference between applications of lean principles in the manufacturing and service industries.

References
http://www.toc-lean.com/Goal_Overview.htm
http://manufacturing-works.com/lean/eight_wastes.php