| p>Underlying the operations of every company is its | | | | happens in time with the demand from the customer. |
| value delivery system. It is the central processing unit | | | | Production happens when needed-no more, no less. |
| of the entire company. For example, what does it take | | | | Continuous flow is based on the principle of moving |
| for a computer manufacturer to receive an order, | | | | one item at a time (or a small and consistent batch of |
| process the order, produce the computer, deliver it, and | | | | items) through a series of processing steps as |
| collect payment? What are all the steps that a | | | | continuously as possible, with each step making just |
| mortgage company goes through in processing a | | | | what is requested by the next step. The concept of |
| mortgage application and delivering a timely and | | | | continuous flow can be summarized in four |
| accurate loan decision? How does Toyota design a | | | | words-"make one, move one." |
| new vehicle made up of thousands of component | | | | Line Balancing |
| parts, manage the daily flow of orders and shipments | | | | Line balancing is evenly distributing work among the |
| with suppliers and assembly plants? | | | | people in the process with the objective of meeting |
| Each business operation is different, but all of them | | | | customer demand (Takt time). This tool optimizes the |
| share one common trait: all are systems for creating | | | | utilization of personnel so that all people in the process |
| customer value-value delivery systems. A company's | | | | are doing more or less the same work content. |
| performance is the direct consequence of how | | | | Buffer and Safety Stocks |
| effective the system is managed. Companies that | | | | The focus of all lean process improvement is to |
| operate more efficiently and responsively than their | | | | remove any constraints and ensure all processes run |
| competitors have better managed value delivery | | | | flawlessly. Sometimes this is not always possible for |
| systems. Many company value delivery systems | | | | the following reasons: · Removing all the |
| perform poorly because of time traps. One of the | | | | process bottlenecks at once may not be feasible but |
| most formidable time traps is the planning loop. | | | | has to be done in phases |
| The Planning Loop Trap | | | | · Stabilizing the process may take longer than |
| A fundamental test of the quality of a company's | | | | anticipated |
| value-delivery system is whether or not it is caught in | | | | · Wide swings in customer demand |
| the planning loop. All businesses must do some sort of | | | | Under such circumstances buffer and safety stocks |
| planning for the future to ensure they are ready to fulfill | | | | are used. In a manufacturing situation buffer and |
| customer orders. | | | | safety stocks could be pre-determined levels of raw |
| Manufacturers are challenged by the need to order | | | | material, sub-assemblies, etc. In an office environment it |
| raw material, schedule facilities, and add labor, and so | | | | could be overtime, temporary workers, holiday pay, |
| on. Traditional manufacturing requires long lead times to | | | | etc. |
| settle conflicts between various jobs or activities that | | | | Takt Time |
| require the same resources. The long lead times, in | | | | In order to become flexible you must understand your |
| turn, requires sales forecasts to guide planning. | | | | customer ordering patterns (demand). Once you |
| Because sales forecasts are predictions they are | | | | determine customer demand you can determine Takt |
| inevitably wrong, however well intentioned. Naturally, as | | | | time or the pace of customer demand. Takt time is |
| lead times increase, the accuracy of the sales | | | | the rate at which an organization must produce a |
| forecasts deteriorates. With more forecasting errors, | | | | product to satisfy customer demand. Producing to takt |
| the need for safety stocks and excess capacity at | | | | means synchronizing the pace of production with the |
| every level increases, and inventories swell. | | | | pace of sales. |
| Forecasting errors also mean more unscheduled jobs | | | | Standard Work |
| have to be expedited, thereby squeezing out | | | | Standard work is the "best known way" of doing the |
| scheduled jobs. The need for even longer lead times | | | | work. It can be based on the experience of the |
| become greater, and the planning loop expands-driving | | | | workforce, industry benchmarks, and current process |
| up costs, increasing delays, and creating inefficiencies in | | | | capability or technology requirements. Standard work |
| the value-delivery system. Managers trapped in the | | | | ensures that workers are following the same process |
| planning loop often react by asking for better | | | | every time. The method is documented in writing so |
| forecasts and longer lead times. However, this is | | | | that everyone understands how the job is done. |
| treating the symptom rather than the cause of the | | | | Work Cells |
| problem. | | | | The objectives of work cells are to create |
| The only way to break the planning loop is to think | | | | independent, optimized, all inclusive operating units that |
| Lean and reduce the time wasted activities throughout | | | | use minimum space with all activities sequentially |
| the value-delivery system, thus reducing the need for | | | | placed next to each other, usually processing for a |
| lead times. After all if you could drive lead times down | | | | product family. This allows product to be processed in |
| to zero, you would only have to forecast sales one | | | | a continuous flow. |
| day in advance. The really forward thinking companies | | | | Pull |
| understand this concept and are breaking the | | | | Providing what is needed, when it is needed, on time, in |
| devastating loop that strangles much of traditional | | | | the stipulated quantity. In a pull system production is |
| manufacturing and non manufacturing organizations. | | | | triggered by a signal (Kanban) based on what has |
| While lead times of zero is idealistic successful Lean | | | | been consumed, unlike a push system, in which |
| organizations have at a minimum kept their lead times | | | | production is based on historical trends or sales |
| from increasing and many have reduced them, | | | | forecasts. A pull system enables work to flow without |
| thereby lessening the planning loop's damaging effect. | | | | detailed schedules. There are many other lean tools |
| Escape from the Planning Loop Trap | | | | available but implementing these few will help you |
| To escape from the planning loop companies have | | | | escape the planning loop trap. |
| two choices. | | | | The challenge of becoming more flexible by reducing |
| 1. Produce to forecast and ignore the fluctuations in | | | | the time consumption in your value streams is not only |
| demand that would cause them to do otherwise. | | | | related to the factory but also white collar or office |
| 2. Reduce the time delays in the flow of information | | | | areas. Typically the majority of time for producing a |
| and product throughout the value stream. | | | | customer order is consumed beyond the factory-by |
| The real solution is to reduce the consumption of time | | | | decision makers and by information processors. In |
| throughout your value-streams to become more | | | | many cases 85% to 90% of the total value delivery |
| flexible. Flexible factories consume significantly less | | | | time of a manufactured product is eaten up by |
| time than traditional managed factories. The | | | | administrative processes. This is a significant |
| improvement in response time from being more flexible | | | | observation because it helps makes the case for lean |
| is even more impressive than in the improvement in | | | | process improvement in service organizations and |
| the productivity of labor and costs. Many companies | | | | offices. |
| have dramatically improved their manufacturing | | | | Conclusion |
| response times by streamlining their processes and | | | | The planning loop trap is the relationship between |
| becoming more flexible. Consider this example of one | | | | forecasting errors and long lead times. Changes in |
| of Toyota's suppliers. A Toyota supplier had a lead | | | | customer demand results in forecast errors which |
| time of 15 days to ship parts to a Toyota assembly | | | | impacts the lead times in a traditional manufacturing |
| plant. Dissatisfied with this level of response to its | | | | environment. As the forecasting errors grow |
| changing needs, Toyota went to work to help the | | | | inventories increase; more unscheduled jobs are |
| supplier reduce its lead time. By reducing lot sizes, they | | | | expedited squeezing out the scheduled jobs. |
| cut the supplier's lead time to six days. After | | | | Forecasting errors also increases the need for even |
| streamlining the factory layout to reduce much of the | | | | longer lead times, and the planning loop swells-driving |
| work-in-process inventory, the lead time fell to three | | | | up costs, increasing delays, and creating inefficiencies in |
| days. Finally, the elimination of all work-in-process | | | | the value-delivery system. |
| inventories resulted in the supplier being able to | | | | You can overcome the planning loop trap by utilizing |
| respond to Toyota with only a one-day notice. | | | | lean tools and techniques to produce at the rate of |
| Companies can become more flexible (reducing | | | | customer demand and enjoy the following benefits: |
| wasted time) by applying the basic principles of Lean | | | | · Dramatic reduction in inventories |
| thinking. Some of the key techniques are explained | | | | · Reduced operating costs |
| below. All of these tools attempt to create continuous | | | | · Reduction in delays |
| flow and pull at the rate of customer demand, thereby | | | | · Improved customer response time |
| shortening lead times and reducing inventories. | | | | · Improved efficiency |
| Continuous Flow | | | | The planning loop is a time trap. Lean thinking forces |
| This requires sequencing production or service | | | | you to look at this time trap and develop solutions to |
| activities so that they move in a flawless manner. In | | | | eliminate the trap and never get caught in it again. |
| continuous flow, the processing of a part or document | | | | |