Prioritization and Integration of Lean Initiatives with Theory of Cons - PDF document

1 Prioritization and Integration of Lean I
Prioritization and Integration of Lean Initiatives with Theory of ConstraintsbyKevin D. SchwainBachelor of Science in Mechanical Engineering, Iowa State University, 1998Submitted to the Department of Mechanical Engineering and the Sloan School of Managementin Partial Fulfillment of the Requirements for the De

2 grees ofMaster of Science in Mechanical
grees ofMaster of Science in Mechanical Engineering andMaster of Business AdministrationIn Conjunction with the Leaders for Manufacturing Program at theMassachusetts Institute of TechnologyJune 2004@2004 Massachusetts Institute of Technology. All rights reserved.Signature of AuthorDp'artment of Mechanical Eng

3 ineeringSloan School of ManagementMay 7,
ineeringSloan School of ManagementMay 7, 2004Certified byDave Hardt, Thesis SupervisorProfessor of Mechanical EngineeringCertified byDonald Rosenfield, Thesis SupervisorSenior Lecturer of ManagementAccepted byMargaret Andrews, Executive Director of Masters ProgramSloa.S~chool of ManagementAccepted byAin Sonin

4 , Chairman, Graduate CommitteeDepartment
, Chairman, Graduate CommitteeDepartment of Mechanical EngineeringMASSACHUSETTS INS EOF TECHNOLOGYJUL 0 1 2004LIBRARIES _BARKER with Theory to the Sloan School Partial Fulfillment The principles as a through continuous Jones have this process Value stream to See as these mapsthen integrated that difficult Adv

5 ice offered environments and the This th
ice offered environments and the This thesis upon Rother work in projects that the Eastmanpaper finishing the system and the tool for for its m etrics the V M odel form the the lean these maps an annual value stream what order helpful butstate value Hence, our to formalize and improve improve liken capital

6 allocation without coherent philosophy
allocation without coherent philosophy and processto "a stalagmite: shapeless, inefficient, and of little usefulness." David Garvin in the "Short-term improvement programs sometimes value stream where the Illogical sequencing * Sub-optimizing focusing on the need projects into the regular projects must costs

7 associated Integrating the proposedproc
associated Integrating the proposedprocess with the corporate planning process this thesis.and Shook it does not go far enough. Further development is required to ensure resources aredeployed effectively and the We will for linkages the foundation single work explore the of Findingsupon Rother are employed

8 basis for the least supplied. We conclud
basis for the least supplied. We conclude the Theory This framework the context the system this thesis the firm. will conclude. we enumerate the results experience after framework. We corporate planning processes. Next, how the incorporated into the corporate planning budgeting process.business today the Pla

9 n-Do-Plan-Do-1999]. This cycle ensures p
n-Do-Plan-Do-1999]. This cycle ensures process feedback prioritization process fit in framework for this Improving the complex, again with the long-term strategy For example, be de-emphasized. and sequencing the greatest In a in the increased quality, decreased operating costs. This direct labor, return compa

10 risons must be considered. the Literatur
risons must be considered. the LiteratureLiterature1. Establish a sense of urgency2. Form a powerful, guiding coalition3. Create a vision4. Communicate the vision5. Empower others to act6. Plan for and create short-term wins7. Consolidate improvements and produce more change8. Institutionalize new approachesT

11 his thesis, while recognizing the import
his thesis, while recognizing the importance be supported to observe framework will successful change improvement frameworks: frameworks: 1996]. The history of leanmanufacturing principles are traced back to Taiichi Ohno Ohno 1998]. These principles were first applied at Toyota Motors and have sincebecome com

12 monplace in manufacturing Lean practitio
monplace in manufacturing Lean practitionerslean can be into three sizes (facilitated throughout the to make one product. the customer implies that material onto improvement activity. 'go on gemba' means that to theopportunities. Organization seiton, seiso, seiketsu, or self-discipline.is the move inventory

13 and quick machine changeovers Standard w
and quick machine changeovers Standard work the Japanese Japanese 1996],others have reported implementation difficulties [Rinehart 1997]. Some practitioners are seekingto use the tools and techniques initially intended for shop floor improvements processes and great success success 2000]. Motorola is credited

14 with creation of theSix Sigma quality s
with creation of theSix Sigma quality standard in the late 1980's in their pursuit in both Sigma refer per million disappoints customers the financial firm failing failing 1999]. Projects areproposed by Sponsors, advised by Master Black Belts, and led by Black Belts Green Belts.exactly the same examine the

15 the describes selection performance, and
the describes selection performance, and feasibility. impact on sub-process scoring targeted for for suggest a similar matrix, suggested. Second, collected and and propose five steps towards the project the impact performance indicators.The authors so as each projectof Constraintsthe method popular works see

16 ing interrelationships rather seeing pat
ing interrelationships rather seeing patterns change rather 'snapshots.' It is a a 1990]One tool for The Theory Theory andis more fully fully The American Production andInventory Control Society (APICS), lead by author Thomas McMullen, Jr. publishedIntroduction to the System in to find problems presented Mor

17 e specifically, the rate purchasing thin
e specifically, the rate purchasing things that it money that the system constraint can could be business rule expense or before the to ensure adequate supply does optimized components system. Only analyzing the The third subordinate non-constraints. further these The fourth step in the second longer on may

18 be possible product mix throughput. Fina
be possible product mix throughput. Finally, the less constraints that improvement. Advocates this five-step as a a describe the formal corporate strategic planning process. Thisprocess operates different levels in the refers to be formulated, in the markets. This requires interaction leads to in the proces

19 s. Once must be the corporate Finally, b
s. Once must be the corporate Finally, budgets appropriated based upon corporate objectives The authors 'operational funds' This budgeting process we start realistic budget.budget.describe a similar, three-tiered model of manufacturingstrategy. Garvin [1993] utilized their work in proposing an Integrated Fram

20 ework Strategic Planning manufacturing
ework Strategic Planning manufacturing strategic integrates short-term into the model lacks for focusing might follow note that towards the goal is to replace or augment between the For purposes will assume framework proposed from lean, the introduction facilitate adoption from this sequence and Shook in th

21 ree in this prioritization process to in
ree in this prioritization process to integrate this prioritization the context can serve four primary establish value the systemLearn; Repeatnot provide will describe suggest that define value only when etc. It is expected in the be measured, how well customer satisfaction on time well. For work order the s

22 ales reflects the defining our diagram t
ales reflects the defining our diagram the the describes this process in detail.The authors do not recommend sophisticated tools in completing this exercise. the MIT makes this his text text "...when experimentation in real systems Sterman citesrandom error, correlations. Value one component component agrees

23 with this logic, but notes that the bot
with this logic, but notes that the bottlenecks in where there first objective The question we answer is, what process tooling, material, multiple resources will not Take, for to a at a However, this saved doesfocusing on non-value the words Eli Goldratt Goldratt 1999]: Time saved efficiency while we wish t

24 he sensitivity improvement projects meas
he sensitivity improvement projects measure the analysis may other productivity concerned with success, owing talents, organization framework, this and takt. the implementationand elevate the constraint. action is Whether implicit improvement. Learning and buildbuildsuggests that the most powerful learning co

25 mes from directexperience. He continues
mes from directexperience. He continues with a dilemma -"we learn best from experience but we neverdirectly experience most important distance between the outcome, made difficult.that subdivide so as notes that individual spreading learnings beyond that team. Senge the dynamics predict teams reasonable place

26 in the area we wish toinstitutionalize
in the area we wish toinstitutionalize our proposed framework by integrating our planning process into the for institutionalization. the dots' must be both nontrivial will assume assume is representative of the status quo in corporations this model resource allocation discipline absent in previous Annual Rev

27 iew Periodic ContinuousReviewStrategy Pr
iew Periodic ContinuousReviewStrategy Programming BudgetingCorporateBusiness UnitFunctionalUnitFigure 4: Integration of the proposed prioritization framework with a generic corporate strategic planningand budgeting processThe first and most obvious element of this figure is the commonality shared with Figure2

28 . The only new element of this figure is
. The only new element of this figure is the incorporation of the proposed prioritizationprocess. The placement of the proposed process in the bottom right corners is indicative of twomain points. First, the timeline for this integration must be on the annual planning cycle of thecorporation, but the prioriti

29 zation process is one that continues yea
zation process is one that continues year round. Second, themanagers of such a prioritization project are most likely to be .either functional managers orspecial project teams assembled to work across functions and business units.During the annual strategic planning process, business unit and functional manag

30 ers firstdiscuss strategic programming f
ers firstdiscuss strategic programming for the coming year (steps seven and eight) and later, aftercorporate approval, come back to address budget concerns (steps ten and eleven) [Hax, 1984].The proposed prioritization process must play a role at each of these junctures. As business unitmanagers bring strateg

31 ic thrusts to the table at such a planni
ic thrusts to the table at such a planning meeting, current value streammaps should provide a common language and understanding of the current reality. The future26 value stream business unit.process. With to step the detail information should projects aimed tactical projects goals and discussion with busines

32 s unit generic corporate process. Budget
s unit generic corporate process. Budgeting stream model, the value this thesis in the imaging products, solutions for not immune. seasonality in end in hopes quality. Leadership in Kodak lean concepts. Lean involves slitting, spooling, packing, shipping the These processes the process, circular knives. the

33 spooling cuts the involves making each
spooling cuts the involves making each order in the To better system constraint for productivity using Microsoft the model With this model calculates the machine grouping service level, utilization for as a inventory position the lean the Kodak each productfuture states maps. These that these maps provide

34 system described required further -GOnly
system described required further -GOnly where deviate substantially separately. The WIP location, in this in some predicted levels. The model -Yv MKe~. The first model and multiple revision for the described later assignment rather and energy? achieving operational this value. Quality. Labor in this critic

35 al in this type that labor efficiency ha
al in this type that labor efficiency had This decline and analyze insights. Our utilization indicates supplied with upcoming year the model relatively high ------ is the (4 min)9: Model per input reduction. Also, it is evident that as mix grows and changeovers increase, we mustplace even more emphasis on r

36 educing the time we spend changing knive
educing the time we spend changing knives.The second step of this process requires management's judgment. While the figure abovecaptures productivity gain opportunities, the costs associated with these gains are not computed.Remaining questions include: how much will it cost to achieve these reductions? What

37 is theprobability of success of such a p
is theprobability of success of such a project? These are not simple questions and they do not lendthemselves well to this type of model. Said again, what does it take to reduce changeover timeby 4 min? Is it equivalent to the cost of removing one changeover per shift? This informationcan be easily plotted on

38 a 2x2 decision matrix shown in the figu
a 2x2 decision matrix shown in the figure below.nplannedMaintenancereductionKnifeU) ChangeoverxC/)0 Stacker AisleWaiR Thme-LeverageFigure 10: Decision matrix example highlighting relative impact and attractiveness of improvement projectsThe four quadrants indicate desirability of a project. For example, the

39 upper left quadrant ispainted red, as th
upper left quadrant ispainted red, as these projects are costly and risky, while providing little operational leverage.These projects should not be attempted. The bottom right quadrant is the proverbial "lowhanging fruit" or "quick-win" area. These projects should be tackled first as they provide high37 and l

40 ow projects that type gains, be weighed
ow projects that type gains, be weighed been created but will will likely the model.the systemthe work opportunity. Third, wait time. This this can recommended that reduction, standard kaizen for setup for that data we idea, we performed queries. Any escalated immediately. The has numerous measurement in pla

41 ce to helpManagement Dashboard (monthly
ce to helpManagement Dashboard (monthly the production the near-term the productionimprovement is to work towards refining metrics. For monthly dashboard expenses, throughput, described earlier, both understanding changes in this metric over time extremely important. own performance. Lean and expected that t

42 heir future and less than otherwise the
heir future and less than otherwise the constraint system revealed in changeover is observed value stream that proposed applied. For in answering the impact With thelarger picture on the learning: Which teams produceunderstanding thefactors associated valuation: These potentially non-manufacturing is necessa

43 ry in Slitting SlittingCO Time CO Freg2
ry in Slitting SlittingCO Time CO Freg24 620 516 4AppendixSlitting StackerAvailability DowntimePercent Change from 100%PRODUCTIVITY120%100%80%ITHROUGHPUT120%100%80%30831231641.441.942.430831231631131231231031231341.4 41.9 41.841.9 41.9 41.942.4 41.9 42.1-1.3% -1.3% -0.3% -0.6%1.3% 1.3% 0.0% 0.3%-1.2% -1.2% 0

44 .0% -0.2%1.2% 1.2% 0.0% 0.5%83% 87% 84%
.0% -0.2%1.2% 1.2% 0.0% 0.5%83% 87% 84% -5.7%88% 88% 88%92% 88% 89% 4.5%-5.7% -1.1% -4.5%4.5% 0.0% 1.1%UTILIZATION120%100%80%70%66%61%70%66%61%66% 67%66% 66%66% 65%6.1% 6.1% 0.0% 1.5%-7.6% -7.6% 0.0% -1.5%Figure 11: Complete sensitivity analysis results43INPUTS120%[100%80%8 96SERVICE120%100%80%83%88%92%316121

45 0814412096 Jr. Six Sigma Deployment. Six
0814412096 Jr. Six Sigma Deployment. Six Sigma Others Turned James R. Planning Process. The Free and Steven John Wiley the Theory Se-ies on Constraints Management. (Original Japanese other top Christopher Huxley, Robertson. Just Car Factory? and Its Cornell University ed. 1994.Dick, Jerry and Richard Hill. 2