Lean Manufacturing

EDI (Electronic Data Interchange)

2008-10-11T07:55:34Z

When a supply chain of different companies and different processes is carried out, data needs to be exchanged among them. However, data exchange is difficult if each of them uses different computers. Electronic data interchange (EDI) will be useful in that case.

"EDI (Electronic data interchange)" is indispensable for QR (Quick Response) and ECR (Efficient Consumer Response). Both QR and ECR require EDI as a fundamental technology for exchanging order placement/receipt data and billing/payment data between manufacturers and distributors.

When a supply chain is carried out among different companies, transaction data needs to be exchanged amongst computers through communication lines. At that time, even though manufacturers and distributors have the same concept, EDI cannot be realized if they use different computers. EDI is a breakthrough for this technical bottleneck. In EDI, various arrangements that need to be made among interested parties should be based on widely-agreed standard conventions as much as possible.

While EDI is an infrastructure of a supply chain management system for QR and ECR, it is also a technology that supports concepts such as computer-aided design (CAD) and computer-aided acquisition and logistic support (CALS), a higher-level concept of CAD. EDI is based on standardization of electronic data exchange. There are many organizations that make rules for the standardization, such as ANSI (American National Standards Institute), EDIFACT (Electronic Document Interchange For Administration, Commerce and Transportation), CII (Center for the Informatization of Industry), EIAJ(Electronics Industries Association of Japan), and VICS (Voluntary Interindustry Commerce Standards Association). The rules differ depending on the types of applications for each industry that are installed on the infrastructure of EDI.

Management practice such as supply chain management that transcends industries can be realized only when an infrastructure of society's resources exists. However, you cannot always gain the benefits immediately even if the infrastructure exists. Promoting the standardization through budgeting by the government and industry organizations will lead to the establishment of a nation's industrial base.

Taken with kind permission from the book:
"Understand Supply Chain Management through 100 words" by Zenjiro Imaoka.
Published by KOUGYOUCHOUSAKAI

Collaborative Demand-to-Supply Management

2008-10-14T08:58:41Z

A Theory and Tools for Collaborative Demand-to-Supply
Management in the SCM Age

Akihiko Hayashi
The University of Electro-Communications
1-5-1, Chofugaoka, Chofu, Tokyo, 182-8585, JAPAN
Email: ahayashi@se.uec.ac.jp

Nobuaki Ishii
Bunkyo University
1100, Namegaya, Chigasaki, Kanagawa, 253-8550, JAPAN
Email: ishii@shonan.bunkyo.ac.jp

Masayuki Matsui
The University of Electro-Communications
1-5-1, Chofugaoka, Chofu, Tokyo, 182-8585, JAPAN
Email: matsui@se.uec.ac.jp

Abstract. In recent years, the collaborative demand-to-supply management which strategically supplies products to the market so as to maximize profit is a critical role for establishing a sustainable company. However, sales sector and production sector, respectively, do not always work together for corporate-wide optimization. In the most case, sales sector is responsible for maximizing sales. On the other hand, production sector is responsible for minimizing production cost. In the SCM age, this situation causes to produce excess inventory as well as long order fulfillment time. For the collaboration of both sectors, a strategic demand-to-supply map has been developed. The map consists of a row for demand speed and a column for the smoothing factor, and the respective elements indicate the indices in economics and reliability on collaboration. This paper presents a theory and an effective planning tool, called the planner, for the collaborative demand-to-supply management based on the strategic demand-to-supply map. The planner consists of demand forecasting, aggregate planning, strategic map, production scheduler, and progressive analysis. The effectiveness of the planner is demonstrated using a numerical example. In addition, this paper shows that the planner is useful not only for supporting the collaborative demand-to-supply management but also the systematic training and education for staffs at sales department and production department. This paper also presents the potential areas of future development on the collaborative demand-to-supply management and the planner.

Please click below to load the PDF file version of this white paper:
A Theory and Tools for Collaborative Demand-to-Supply Management in the SCM Age

Production Management & Planning: Tomoichi Sato (Part One)

2008-10-21T05:21:37Z

Foreword:
Lean-manufacturing Japan is delighted to be able to publish the first part of a very fascinating interview about the various aspects of production control by leading industry expert, Tomoichi Sato.

Production Management and Planning

Introduction:
An interview with Tomoichi Sato about the importantance of planning in the manufacturing industry and how the different levels of planning interact.

Profile:
Tomoichi Sato
Senior Deputy Manager, PMP (Project Management Professional)
EPC Technology Advancement Group, No. 2 Project Division
JGC Corporation

Tomoichi Sato has been serving in system analysis and project management roles for both domestic and overseas projects. He has been involved in both the design and implementation of systems for production planning, advanced scheduling, ERP, MES and e-Procurement. He is a Registered Management Consultant for Small and Medium Enterprise (PMP). Tomoichi Sato has also authored a number of books including "Introduction to Advanced Production Scheduling", "The Art of Time Management", and "Understanding BOM/Bill of Materials" (in Japanese).
1981 MA. Graduate School of Tokyo University (Chemical Engineering).
1985-1986 Visiting Researcher at US East-West Center.

Part One:

Q. Production scheduling is only one part of the overall planning and management of production. There are many words that we use such as Production system, Production management and Production planning etc. Could you first introduce each of these topics and explain how they work together?

A. First of all, I would like to start with the definition of the production system? The production system is a system to convert demand information into products. This system is composed of humans, machinery and the space provided by normally a kind of building. They are generally called resources, human resource and mechanical resource. Sometimes we also include utility because this is also a type of resource. Using these resources, the production system converts demand information into the products to be supplied.

The conventional view is to regard raw materials or parts as input into the production system which converts them into the products (Figure 1).

Figure 1. The conventional view of the Production System.

However, my interpretation is a little bit different. The main input is not the raw materials or the parts but the demand information. My perspective is that production system converts demand information into products with supporting resources and raw materials and parts. This is what drives the overall system. From the conventional point of view, you can produce products without any demand information. However, as a consequence, you may have a lot of products in your warehouse that nobody needs. This can still be called production, but you are producing products with no value. The production system, which produces added value, is driven by demand information (Figure 2).

Figure 2. Tomoichi Sato's interpretation of the Production System.

Of course, there is a process to transform this demand information into a product specification, manufacturing process information and work instructions or a production plan and production schedule. These activities are called engineering. Engineering transforms demand information into a kind of blueprint of the product. In addition, the production control function creates the production plan information. Inside of the production system, based on these two pieces of information, people produce products from the parts and raw materials by using resources. This is the production system.

Q. So within the overall production system, you have product management and production planning.

A. I'd say that the terminology here is a little bit confusing, or used differently. The activity to create a production plan is what I would call production control. Control is a kind of more detailed activity compared to management.

Q. Is this what we call SEISAN KANRI (production control) in Japanese?

A. One of the very confusing things in Japanese is that we only have the one term, KANRI. However, in English, we have management, control, and administration. These are different things, right? Normally management is a higher activity to oversees things, to organize people and resources, and make the system work properly. Control is more precise. Management creates the system, whilst control just operates the system. So, control is usually focused on the near future and monitors resources or people. This is a kind of feedback control, in a sense. To the contrary, management words as "feed forward". Administration is a kind of supporting work. We should be very careful when we talk about KANRI. So, I try to avoid using the word KANRI. Instead, even in Japanese, I try to use the words "manajimento" or "controru".

Q. So what is the role of the production management within the whole production system? The view is that the management is at the top giving the orders, but in fact, is their role to support the production?

A. Let's just imagine there is a kind of craftsmanship. My father-in-law was once a craftsman. Later he became a manager within a small company, but as a starting point, he was a craftsman of wooden barrels, the smaller ones used for daily washing and the larger ones used as a bathtub etc. In the good old days, the craftsman himself received the order from the customer. Then he would pick the raw material, in this case wood, cut and assemble it. Everything is done by his own hand. And finally he delivers this product to the customer. In such a world, all of these things are done only by the craftsmen. No other activity is required. Of course, there will be some selling, invoicing and collecting things but these are done by a salesperson. In my father-in-law's case, that was done by my mother-in-law. When his business began to grow he then hired more craftsmen. As the production volume increased, what happened? There should be someone who is specialized in the purchase of raw materials and wood material, because handcrafts heavily depend on the quality of the wooden material. And also, there should be a specialized guy to store the raw materials and the finished products, take things from the warehouse and deliver products to the store. Although there are now many different kinds of specialized jobs, the core work which creates added value is still focused on the cutting and assembling. This is what we call direct work which creates added value (Figure 3).

Figure 3. Only the direct work creates added value.

And the other work, for example, the purchasing, warehouse keeping and transportation work, these are supporting work. As the volume of work increases, the specialization of this supporting work increases the productivity of the craftsman. If there are no other people to assist then the craftsman himself has to go to the raw material supplier and negotiate, or he has to take things from the warehouse etc. In this case, his time to focus on the direct work is limited. That's why to increase the productivity of the craftsman's direct work; this kind of indirect work is shifted to the supporting people. And the more the business volume increases, then the more specialist jobs will be required, for example, someone who is specialized to deliver the raw material to each craftsman or someone who has to set up the ordering or even someone who prepares the tools needed everyday. Only the direct work creates added value. We also have the supporting work as well. However, taking raw materials from the warehouse to the shop floor doesn't create added value. So the work is necessary, but it isn't added value work. The work that is necessary, but isn't added value work, we call supporting work. We also need some specialist work as well, which is indirect work. For example, scheduling, purchasing, selling or accounting, which we can call administrative work. These people do not contribute directly to create added value, so why are these people required? These people only contribute to increase the productivity of the direct workers. In the production system, the most important people are the laborers working on direct work. The other people are helping these people so that they can work effectively and efficiently. In the larger sense, we call this kind of thing, production management (Figure 4).

Figure 4. Production management is there to support the direct work.

Q. So the job of production management is to make sure that each person can concentrate on their job by making sure that the work environment is organized so that they don't have to worry about other things.

Tomoichi Sato

Tomoichi Sato, at the Lean Manufacturing Japan editorial office, talks about his experiences in the manufacturing industry.

End of Part One . . .

Please click below for Part Two of the Production Management and Planning interview.

Production Management and Planning: Tomoichi Sato (Part Two)

Interview by Lean Manufacturing Japan editor Warren Harrod

Production Management & Planning: Tomoichi Sato (Part Two)

2008-10-21T06:43:03Z

Production Management and Planning

Tomoichi Sato has been serving in system analysis and project management roles for both domestic and overseas projects. He has been involved in both the design and implementation of systems for production planning, advanced scheduling, ERP, MES and e-Procurement. He is a Registered Management Consultant for Small and Medium Enterprise (PMP). Tomoichi Sato has authored a number of books including "Introduction to Advanced Production Scheduling", "The Art of Time Management", and "Understanding BOM/Bill of Materials" (in Japanese).
1981 MA. Graduate School of Tokyo University (Chemical Engineering).
1985-1986 Visiting Researcher at US East-West Center.

Please click below for Part One of the Production Management and Planning interview.

Production Management and Planning: Tomoichi Sato (Part One)

Part Two:

Q. What is the biggest problem for management when you try to manage all the different parts of the company, to make sure that it all does work together correctly?

A. I'd like to point out two different things regarding your question. One thing is how do we measure the effectiveness and efficiency of this production system? The purpose of management is to make this system effective and efficient, right? Another thing is that because the core part of the production system is human, how do you make people work comfortably and happily? This is the human factor. Both of them are very important. Let me explain about efficiency and effectiveness first. In Figure 5, we have one axis as the time, and the other axis representing product quantity. We also have a cumulative curve, which represents the demand from the customers. Sometimes a steep rise may mean higher demand, and in another season there will be lower demand. There is another line for the production supply of the products. If the supply curve is above the demand curve, then what exactly does it mean? All the time that we have more supply than demand it means that we are doing things ahead from the viewpoint of time. Or, if you look at the quantity then it means that we have more stock available. How about when the supply is less than demand? If we have a shortage of supply then that means the time taken to deliver the product is being delayed. So, it's obvious that the lower supply curve is quite ineffective. Are we effective from the upper supply curve?

Figure 5. The relationship between supply and demand.

Q. I guess you can say that as far as your customer is concerned, having too much stock is better than having a shortage of stock, but this is going to cost you money.

A. That's right, so the best situation is to make the supply line perfectly fit the demand line. In an ideal world this would be fine but in the real world anything can happen and it does. So, normally, the supply curve is like Figure 6. Sometimes there is a shortage and sometimes there is too much stock. Thus, the goal of the production system is to match the supply curve as closely as possible to the demand curve. This is effectiveness. We can measure effectiveness in two ways, through the time line and on the quantity base. In the time line, we are referring to the lead-time. If it takes, let's say, twelve weeks from when we receive demand to when we can supply, then we can try to shorten the lead-time by moving the supply line closer to the demand. When we measure the quantity base, this is the inventory. These two ways are looking at the same situation from different perspectives. These factors represent the effectiveness of the production system. Then, what is efficiency? We call added value as the efficiency. But, what exactly is added value?

Figure 6. Greater effectiveness leads to shorter lead-times and lower inventory.

Q. To produce something, you have a cost, so the added value is what you add to that cost to make a profit. It is what you are actually generating for profit?

A. That's right. So, the added value can be defined as the sales price minus the material cost. In our production system we know the sales price. We can calculate the costs which we pay out to external parties for raw materials or electricity etc. outside of our production system. This gives added value.

Q. In this case, would external costs also include the salary of the workers?

A. No, that's a very good point. The salary of the workers is paid from the added value. Added value is a kind of GDP, gross domestic product. GDP is a summation of all of the company's added value. There is another production system, which are the companies that we buy from the raw materials from. And there is probably another company that buys our product and sells them to the customer etc. So the sales and costs are totally cancelled out and the Gross domestic product is the total of all of the company's added value. There is also a term called productivity. This is defined in management science or in accounting. Productivity is a ratio of output to input. This is very general definition. For our case, added value is the output of the production system and the input is the manpower of the human working in the production system. Conventionally, we have used headcounts. But, recently, the employment system has changed. Many workers are part-timers or self-contracted workers so instead we often use man-hours instead of headcounts. Added value productivity is the measure of productivity of the production system. This represents the efficiency of the production system. The purpose of production management is to increase effectiveness and efficiency. The second aspect is the human factor. So let's suppose you won a kind of lottery and suddenly you became a rich person, wouldn't that be nice? In such a case, what would you do?

Q. If it were I then maybe I'd spend some, and then save some.

A. One of my friends asked me, "What would you do, Sato-san, if you suddenly won 500 million dollars? That far exceeds the lifetime income of a typical worker, so that means that we don't have to worry about having an income. In such a case, which job would you choose?" "Hey, do I have to choose a job?" He said, "Yes. Because if you are simply idle or lazy then you will go crazy". He said that currently he was working for his company, which is both a consequence of some kind of coincidence and his choice, right? And, yeah, it's exactly the same for me. But, sometimes he imagines, what job would be better if he can forget about the income and he said, "It would be nice to be a train driver". The point I want to make is if I won 500 million dollars would I continue current work? Would my work still interest me? This is a very basic question, right? So, if craftsmen are working in a factory, are they still willing to continue working as craftsmen, even if they became millionaires? Probably the purpose of production management is to create a workplace so attractive that every worker would still want to continue working there even if they won the lottery. This is the human factor and this kind of human factor is unfortunately either forgotten or ignored. We must never forget that added value is only created by humans so the most important thing is to make sure that these people are comfortably and happy. If we divide the work process in to a piecemeal type of thing, like Charlie Chaplin's Modern Times, as you know, a kind of belt conveyer where you work all day then this isn't very attractive. It may be effective, or even efficient but it doesn't make people happy when working. So, the production management has two quite contradicting purposes. To make the production system both efficient and effective, and at the same time, keep the people comfortable and happy. Sometimes, in a lucky case, we can match them exactly but most often there is a tradeoff between these objectives. And even for effectiveness and efficiency there is a tradeoff as well. That's why the plant manager is required and this is only thing he has to do.

Q. So the plant manager is trying to make his factory as productive as possible, while at the same time, making sure that it's a good place for his workers to enjoy their work.

A. I think the purpose of Lean Manufacturing is to somehow meet these objectives simultaneously.

Q. In the past, when workers were cheap, it was often the case that the workers were treated badly, even in the Toyota Production System. In the beginning the workers were treated like any other machine, and that's changed now. But, is it difficult to balance the system? How do people decide which is more important? Is there a category that the plant manager should follow when trying to balance these objectives?

A. Well, the plant manager is also just one part of the whole enterprise, and someone else is driving this plant manager. What kind of measurement is used for his evaluation? This is another key but it concerns a higher issue about management, so I want go in to detail about that now.

Q. You've given us a very good example of how production management fits into the production system. Now, the next stage is the product planning itself. How does that develop within this overall hierarchy?

A. Let me put it in this way. What is planning?

Q. For example, you want to go to Tokyo on holiday. You have a goal and you have various means to achieve that goal, and so planning is to decide which of those means you use to achieve your goal. Do you want to go via the quickest route, or the cheapest route, or the most interesting route? Deciding how you want to do it with all these different factors is what you could call planning.

A. Exactly and the planning activity can be broken down into three steps. Firstly, identify tasks. From the start to the overall goal we can break down the process into controllable pieces or meaningful steps or some alternatives. So the first thing in planning is to identify tasks. The second task is to assign the resources to these tasks. The production is done by many people in a collaborative way so we have to decide which person or which production line will be used for which task? Finally, the third step is to create the timetable and in another sense this is the scheduling. These three steps are planning. In some cases, the sequence is different. It depends on which task is the bottleneck, the resource or the time. For example, if time is limited and the resources are abundant then probably as the second step we should create the timetable first and then assign the resources. But normally we first assign resources and then create the timetable. Which way is workable? It depends on the situation.

Q. You've been to many companies and taken a look at their production system and the management. Normally, which area do you have the most trouble with? When you look at a company and say, "You can do better", which area do most companies need to focus on, is there a typical problem that most companies suffer from?

A. That's a good question. In Japan, the main issue that I've been seeing is kind of a paradigm shift from let's say the 1960's or 1970's, when this country was rapidly growing. At that time the production system was producing things without being driven by demand information. And in such a case, the plant or company itself was run on the production style of make-to-stock. Now, from the 1990's to 2000 we are living in the market situation so, we are forced to shift to make to order or assemble-to-order. However, the management perspective or the management control measurement for the production system was still in the previous age, so as much as you make, is the best way. I've seen many plants and companies and the biggest thing is they did not change their mindset from the good old 1960's and 70's. All the rules and measurements of production are still set in the good old days to maximize the product quantity. However, the sales division wants different things everyday, and they change what they want every day. This is the main contradiction inside manufacturing companies.

Q. So that's why that production planning now is more important than it was before, and it will become even more important?

A. Because markets are changing. If the markets change rapidly then it's more difficult to fit a supply line to the demand of the changing market.

Q. As you mentioned, using a production scheduler can help in one of the three tasks, the creation of the timetable. However, if you don't have the overall planning in place, and you only try to use the scheduler, what problems happen? Can you try to only concentrate on the timetable without thinking about the other tasks as well?

A. In order to use the scheduler in such a way, you have to have the entire inventory for the raw materials in high stocks piles. Then all you have to do is to assemble it, right? However, suppose that you don't have any raw materials or parts, or you try to minimize that kind of inventory, and the demand is changing every day. Then, what kind of schedule can you create? The scheduler can process things only if the raw material is available at the right timing. In such a case, that bottleneck is purchasing, not the production. That's why I say, planning is so important. The planning provides a base of rough supply curve that the scheduler can fit more precisely. Without planning, you cannot make that happen. The other strategy of course is to pile up all the raw materials and parts in the warehouse, but that's not efficient any more.

Q. On the other hand, if you have a production system with really good planning, do you really need a scheduler? A lot of companies think that they have their factory planned well, and that they don't need a scheduler as well, or they can do it by hand. Is it really important that they implement a production scheduler, or is it possible to do good planning without a scheduler?

A. It depends on the situation. For example, if you have only one product, you don't need scheduler. However, the more product families you have, the more you need scheduling. Also, the quicker your markets change, the more you need scheduling.

Q. Many companies started small a long time ago, and they have slowly gotten bigger. As they've gotten bigger, the market has changed as well. Some of these companies have slowly changed their mindset, and have been able to adapt, while other companies have been very slow, and then they suddenly try to change. For those companies now, who realize that the way they're managing the factory is not appropriate, how should this kind of company go about changing the way that it manages its production? I guess they contact a company such as yours to assist. Do you have any advice for companies who need to change? What things should they consider before they change?

A. That's a very difficult question. Mindset cannot be changed in one day or even in one year. It takes a very long time, so there is no simple answer.

Q. You mentioned on a previous occasion that when you go to a company, first of all you explain the concept, and if they don't understand the concept, then you explain the method. And then if they don't understand the method, you then show them the means. And finally, if they can't implement the means, you give them a scheduler and just say, "OK. Do it like that." If they have a tool, then, even if they don't understand it, at least they have some sort of data by which they can see whether they are meeting their goals or not. Would you still suggest that as a way for a company, who can't understand? Can they can use some sort of tool or some sort of idea to change the way they think?

A. Well, I should say tactics cannot fill out a lack of strategy. So, a scheduler cannot fill out the lack of planning. A scheduler can improve some things, but the improvement is smaller, compared to the situation when they change the way of production planning.

Q. Finally, do you have any additional comments or advice that you would like to add to what we've talked about here? Maybe some companies have listened to this interview, and they think, "Oh, yes, we need to change." Or, "We agree with your system." Most of them will say, "Well, what should we do? You know, we've listened, and we agree, and we'd like to change our company." What advice would you give them for their first step?

A. We should reconsider about the measurement. Do not believe the measurement is given from the heaven. Simply having the fastest production line may not be the best measurement factor or criteria. In many cases, those measurements were set in the good old product-out days and people are still trying to fit into that measurement or that kind of direction. The most important thing is to reconsider what is the best measurement for the production system, rather than sticking to the same old measurement. What is Lean Manufacturing? What is lean? Lean means to fit the supply curve as closely as possible to the demand curve. This is something where if you are fat, you may have too much stock, right? But, stock is not the only good measurement for production system. Lower cost, this is not the only governing measurement either. If we only pursue cost reduction, then we would probably cut the salaries of all those direct workers or subcontract the work. In such a case, the cost will be reduced, but you will have forgotten the human factor and your production system will slowly deteriorate. So, please reconsider the way you measure your production. That is the starting point.

Q. When they do consider how they should be measuring the goals of the factory, then they will come to understand how they should better manage it and better plan it so that they achieve these goals.

A. That's right. The production system is a very big, complicated system, so it's quite difficult to understand in one shot. Therefore, people tend to set piecemeal measurements and drive people in piecemeal. It makes things much more complicated and worse.

Q. In a big company, when everybody has different measurements, that's when things become difficult. Is it also important that when you do decide a measurement that you make sure that it's the same measurement for everyone in the company?

A. Yes, in a consistent way.

Tomoichi Sato
Tomoichi Sato is a veteran project analyst who has already published numerous books on Production Scheduling and Project Management.

End of Part Two.

Interview by Lean Manufacturing Japan editor Warren Harrod

Introduction to Factory Mechanism

2008-11-11T02:28:31Z

"What will be left when we return to our own rooms and throw all industrial products out of the window? Vegetables, fruits, potted flowers...not much will be left. When we think in this way, we notice again that our everyday life is supported by industrial products, and by a manufacturing industry which manufactures these industrial products. Without this manufacturing industry, our life is not sustainable.

However, the kind of activities performed inside a factory, surrounded by the factory walls, are difficult to understand from the outside. In this series, we will explain the mechanism of manufacturing inside the walls of a factory in simpler terms.

Three important missions of the manufacturing industry:

1. Develop excellent products.
2. Supply products to the market at appropriate volume levels.
3. Avoid placing a burden on the environment.

The first series mainly explains the structure of the above-mentioned "2. Supply products to the market at appropriate volume levels". The content is a partial abstract from the book "Mechanism of a Factory" with illustrations, courtesy of the authors and Nippon Jitsugyo Publishing.

Used with kind permission from the book:
"Mechanism of a Factory with illustrations"
by Mitsuo Matsubayashi and Hiroshi Watanabe.
Published by Nippon Jitsugyo Publishing.

Factory Mechanism:Outline

2008-11-11T02:32:38Z

Framework of Factory Mechanism

Let's take a look at the framework of a Factory Mechanism.

First, the focal point is the site of production. In the figure, it is the part labeled "production". This is where machinery and equipment is placed, where workers are, and where products are processed and produced. It is necessary to purchase materials and parts to be used during "production", from outside. This is the part labeled "purchasing" on the left side of the figure. Some companies may call it "procurement". In an assembly type of factory, the material cost takes up 60% to 80% of the product cost. If the company can manage to procure materials and parts at a low price, the profit rate of the company can go up. In addition, if the procurement of materials and parts is behind schedule, the "production" site cannot make a start on processing. Then, human resources and equipment will be idle.

From this point of view, "purchasing" is work which has a great meaning for a factory.
The company cannot count something as a sale, until when what was produced, has been sold. The "sales" shown on the right side of the figure is in charge of sales. Unless there is an order, the "production" site falls under the situation of so-called "no job" category, and it cannot utilize its capabilities. "Sales" is quite an important part of company management.

This flow of "procurement" →"production"→"sales", the horizontal flow in the figure, is one of the frameworks of a factory. The other framework is "development・design"→"production", the vertical flow. This is the operation to develop products and technology, in order to make production possible at the production site.

Since the market life time of products becomes shorter, and the introduction of new products is required one right after the other, the importance of this vertical framework is becoming stronger than before. Also, in order to compete with cheap imported goods, the upgrading of the products is necessary, and we may say that the capability of "development・design" will determine the future of the company.

Information from "development・design"（product specification・method of productin, etc.） is not only used in "production", but also in "procurement", "sales and services".
It is important to adjust the information, which is held by departments, into lines, however, there seem to be many companies where this doesn't work well. In such a company, it is difficult to understand the profitability of a product in terms of life cycle from when a product was introduced in the market, used, and discarded. In order to improve upon such a weak point, an effort of PLM (product life cycle management) is being advocated.

The above-mentioned two flows, of vertical and horizontal, are the framework of a factory, but it is necessary to monitor if the operation goes smoothly, and to correct the direction of the flows if there is an issue.

"product cost accounting & quallity management" and "finance" in the lower part of the figure is this part. "Product cost accounting & quality management" takes actual data of the production activity, checks if product quality and cost of the product are within the planned criteria, and if there is a problem, give a warning to the responsible person. "Finance" is a structure to report the actual operation results to the stockholders and the revenue authority.

"Management Strategy" on the upper part of the figure is to understand the change of the market environment, and lead the factory in future endeavors. "Human resources" is to secure the required number of employees, improve the morale and skill of employees, in addition, it plays the role of protecting the safety and health of employees.

Not presented in the figure, there are the functions of facility management and　information systems in general.

Used with kind permission from the book:
"Mechanism of a Factory with illustrations"
by Mitsuo Matsubayashi and Hiroshi Watanabe.
Published by Nippon Jitsugyo Publishing.

Factories of Different Kinds

2008-11-11T02:57:26Z

Classification by Production Method (part 1)

Every factory is different from others. However, it is convenient to think of them by classifying them into several patterns.

Firstly, if we want to classify them into smaller groups, we can think of industry nomenclature by the government. Japan Standard Industry Classification, categorizes the manufacturing industry into 23 middle items (please refer to the Figure in Factory Mechanism: Outline), and 164 further small items.

Similar classification will be found in each country. For example, North American Industry Classification System (NAICS) is used by USA,Canada and Mexico.

In addition, classification by dichotomy by understanding the features of the production from various points of view is very common.（please refer to the figure below.）

Firstly, the classification commonly used is whether it is the "assembly type" or "process type". This is the classification from the production process point of view, and the assembly type is the factory where parts are assembled to make a product such as an automobile factory, while a process-type factory is where the product is produced from the material through a chemical change. "Assembly type" is sometimes called "discrete type"、(and "process-type" "non-discrete") This name comes from the feature that the product is countable by units.

Another classification is from the product type point of view, which is: "mass production of scant kind of products", "small volume production of diversified products". From the standpoint of factory operation, "mass production of scant kind of products" is efficient. However, because the needs of buyers are diversified, simple "mass production of scant kind of products" is dropping away.

The classification by inventory type will be explained in the chapter as follows. "Flow Shop" and "Job Shop" are other classifications. This is the classification of how to layout the manufacturing machines in the factory. This classification is applied in the oily factory which processes metal using machines such as press machines and lathes.

"Job shop" is where devices are gathered by processing functions such as presses, lathes or welds, along with skilled technicians, each of them consists of one processing center (job shop). The manufactured goods become products by going through various job shops. The route of traveling job shops may differ product by product. Hence, scheduting and progress tracking is important in this kind of factory.

"Flow Shop" is a production site where devices are placed by order of processing of the product. When looking on the site, you can see how a product is gradually being shaped from the starting point to the ending point of the line. The flow shop is to be established when a certain production volume is estimated.

"Line production" and "cell production" are the classification used in assembly-type factory. "Line production" is where the assembly process is divided into sequential works by several workers, and workers stand in process order (stand in line) to work. I assume that our readers may have seen a photo of a factory where workers are standing alongside a belt conveyer.

As the work assigned to each worker is small and simple, the production line can be built by workers with lower wage, and the productivity during smooth operations is high. However, the line production type is difficult to respond to the fluctuation of production volume. This is because the production line is optimized to a certain production volume. In addition, since each work is simplified, it would be difficult to maintain the motivation of workers.

"Cell Production" is to create a work place (cell) by one person or a small number of workers, and manufacture products there. The necessary parts and devices are placed by cell. If the cell is made up of one person, that one person will assemble the whole parts to a finished product. Though the required skill range becomes wider, the sense of achievement will become higher. For the fluctuation of production volume, it can respond by increasing or decreasing the number of cells.

Term Comparison by Classification

Used with kind permission from the book:
"Mechanism of a Factory with illustrations"
by Mitsuo Matsubayashi and Hiroshi Watanabe.
Published by Nippon Jitsugyo Publishing.

Various Manufacturing Systems

2008-11-11T04:02:47Z

Manufacturing Systems Depend on How Long Customers Have to Wait

If a customer waits during the entire process after an order was　placed, i.e., designing, purchasing the necessary parts and materials, making the product, and delivering the product, production management could be an easier process to some extent. Builders who build custom homes employ this system. However, normally, customers do not wait for long. Usually, it takes a much longer time to obtain materials and complete the manufacturing process than our customers can wait.

As there is no choice, one needs to buy a stock of materials before an order is placed, or to make a product. That is, manufacturers buy time by having the stocks. It is difficult to have proper amount of stocks. Stocks are prepared under anticipation of future events. However, this kind of anticipation can often fall short. Stocks which turn idle can lead to losses. However, companies are taking this risk in order to satisfy customer's needs, and are still seeking ways to reduce the risk as much as possible.

In this case, how should we handle the stock? That is determined by how long the customer is prepareｄ to wait.

First of all, there is a case when the customer does not wait at all. In this case, the company should hold the stock of the product at the store shelves. An example is boxed lunches at convenience stores. This is called make-to-plan production. Products at the store mostly fall under this manufacturing system.

Sometimes the customer may wait for some time. In this case, the product is kept partly-finished, and the final finishing touches are made after the order is placed. Hamburger shops and shops selling skewers of barbecued chicken are taking on this system.There are not many examples of this kind of system of products that end-users directly buy.

However, this system may be used between dealers who make a purchase of the products and makers, and between set makers and parts makers. A product which takes time to produce, such as semiconductors, is made halfway, and the final finish is done according to the final order.

This type of production is called "build-to-order production".

Build-to-order is a combination of make-to-plan production of semi-finished goods and make-to-order production of final goods for a customer starting from the semi-finished goods.

When a customer can wait for some time, and when the production process does not take much time, stocks of parts and materials are kept, rather than stocks of partly-finished products.It is less risky to hold stocks in the upper stream of production whenever possible, as it is easier for diversions and resale, in case the stock become idle.

A normal restaurant falls under this type. Cases when ordering an easy-to-order suit, buying a PC through the internet, and purchasing a car, fall under this type.

There are not many opportunities for end-users to receive this type of production service, but it is often used in buying and selling between companies. This type of production is called "make-to-order".
For above three type of production, product design is finished in advance, and which are available as a menu of the product.

The bottom part of the figure　shows the system such as that used by builders which I mentioned at first, who do not hold the stock themselves. Stocks are kept with the supplier, for example, a dealer in lumber.

After the placement of an order, the product is designed and necessary parts and material are purchased and manufacturing process is starts. This is called "fully made-to-order". It is also called "project type". Shipbuilding, etc., fall under this category.

The place to hold stocks during the production process is called the stock point. It is desirable that the stock point be close to the upper stream (left side in the figure) whenever possible. In the whole supply chain process, greater effort is made to reduce stock at the store and running stock, and to quickly replenish the necessary amount of what is needed when it is needed (made-to-order). That is, to place the stock point on the stage of materials and parts.

The left side of the line connecting stock point is the sphere of jobs based on anticipation. The right side is the sphere of jobs responding to actual demand. "Stock point" is sometimes called "coupling point", as it is where the anticipation and actual demand meet.

A factory needs two kinds of slightly different-natured operations for arranging stock based on anticipation, and for production and delivery based on the actual demand. The more the stock point is located leftward, the easier the anticipation becomes. This is because when the stock of the product level is maintained, sales anticipation by product is necessary, but if the stock at the material level is kept, sales anticipation regarding the product group will be adequate.

Used with kind permission from the book:
"Mechanism of a Factory with illustrations"
by Mitsuo Matsubayashi and Hiroshi Watanabe.
Published by Nippon Jitsugyo Publishing.

Implementing the Toyota Production System: Introduction

2008-11-24T08:15:53Z

Toyota Production System

Foreword:
A series of interviews with Professor Monden about the steps required to implement the Toyota Production System (TPS).

Profile:
Yasuhiro Monden
Ph.D., Professor
Faculty of Business Administration
Mejiro University
(Professor Emeritus, Tsukuba University)

Prerequisites to Implementing the TPS:

Although the Toyota Production System (TPS) was originally developed by Toyota Motor Corporation it has now been adopted by many other companies, both in Japan and around the world. As the core element of the TPS, the Just-in-time (JIT) manufacturing system has had many books written about it however, there is more to successfully implementing JIT than simply studying the system itself. Through this series of interviews we will explain about the necessary steps needed to introduce a JIT process and thus implement the TPS.

Toyota production system techniques need to be implemented in the same order as the continuous improvement steps are taken, in other words, from means to goals. The necessary steps can be categorized as follows:

1. Introduction of 5S
The foundation for improvement of the shop floor is the 5S concept: Seiri (arrangement), Seiton (tidiness), Seiso (cleaning), Seiketsu (cleanliness), and Shitsuke (training).

Please click below for Parts One/Two of the Implementing the TPS interview.

Implementing the Toyota Production System (5S)

2. Introduction of one-piece production
Once the 5S concept has been successfully introduced then the fundamental prerequisites for JIT should be implemented: training of multi-functioned workers and layout of machinery in the process sequence.

3. Implementation of small lot size production
The next step is to improve the setup method in order to minimize lot size and standardise the operations to increase productivity

4. Establishing Production Smoothing
For key element for the introduction of the Kanban card system and the minimization of idle time for the workers, machinery and work-in-progress.

5. Implementation of the Kanban system.
The Kanban system manages the JIT production system and is supported by each of the previous steps: production smoothing, operation standardisation, setup time reduction, machinery layout and improvement activities.

The goal of the TPS is to increase profits by reducing costs through the elimination of waste. To achieve cost reduction, production must be able to react to the changing market conditions both quickly and flexibly. This is achieved through the concept of JIT, producing the necessary items in the necessary quantities at the necessary times. At Toyota the Kanban system was developed to manage the JIT however, the Kanban system itself requires numerous activities to be put in place for it to work. The aim of this series is to explain about these activities, the order they take place in and the interaction between them. It is our hope that by better understanding these concepts you will be able to more effectively implement TPS in your factory.

Professor Yasuhiro Monden Ph.D.

Professor Monden, in his Mejiro University faculty office.

Please click below for the Toyota Production System interview.

Toyota Production System: Professor Monden

Interview by Lean Manufacturing Japan editor Warren Harrod

Click below for a list of Professor Mondon's books that are available from Amazon.com:

Prof. Monden Book Store of Toyota Production System

Implementing TPS: Part One - Introduction of 5S (1)

2008-11-24T13:16:07Z

Toyota Production System

Implementing the TPS: Part One

JIT Promotion Project:
Q. When a company decides to introduce the Toyota Production System (TPS) into their company, it's very important that the management take the leading role in the project. What kind of role does the management play and how should they support the implementation of the project?

A. Before introducing various Just-In-Time (JIT) techniques, there must be a big JIT project. The top management must be aware of the risks that we are experiencing right now. For instance, because of the sub-prime loan problem the economy is quite problematic and the revenue is decreasing so top management must realize the need to decrease the outlays or costs in order to increase the profit and this risk management must be shared between people. Even though people often say that Kaizen is important they are forgetting for what purpose the kaizen must be conducted. That is cost reduction and the need for cost reduction must be shared by both the top management and the general employees. So, in order to introduce TPS we have to establish a JIT promotion project.

Q. When the company establishes this kind of project, which employees should be in the project team?

A. The president must be the chief of the project team, the vice-president must be the vice-chief of the project and also, all of the department heads must be members. In particular, the directors in charge of the manufacturing department are very important and also the production engineering department chief and the general management chief. Of these, the production management director must be the center of the project team. Actually, the president and vice-president won't be involved with the actual promotion itself. There must be some practice team for the implementation. The members of the JIT practice team must be the current routine staff that includes the people in the manufacturing department, the production engineering department, the general management department and the foreman for each process and the team leaders of each process.

5S:
Q. What exactly is the beginning practice for JIT?

A. That is the pilot line and when that has finished, its success can be moved to other processes, in order, from the final process to the proceeding process. When carrying out the pilot lines you should start from the final assembly line. However, before handling the assembly line or manufacturing line there must be 5S, which means the abandonment of all kinds of Muda. 5S represents the five Japanese words: Seiri (to clearly separate necessary things from unnecessary ones and abandon the latter), Seiton (to neatly arrange and identify things for ease of use), Seison (to always clean up), Seiketsu (to constantly maintain Seiri, Seiton and Seiso) and Shitsuke (to have workers always confirm to rules).

Q. What kinds of Muda are there?

A. Muda means unnecessary things, such as unnecessary inventory of materials, work in process (WIP) and defective products etc. It also refers to unnecessary jigs, tools and machines. Over time, various kinds of Muda can accumulate in the factory and 5S is the process of removing this Muda. Before introducing 5S most of plants and most of the processes are in a kind of mess.

Q. Obviously deciding what is muda and what is not muda is a big task. What criteria should they use?

A. Usually that criteria is one month's use in the production planning sheet and if those inventory items and/or quantities are not being used in the following month's production planning then they are considered unnecessary. The production schedule for the next month is the output of the MRP system. When they have this information then they can go around the shop floor and judge whether something is necessary or not. This is the Seiri part of 5S.

Q. What should they do with the unnecessary inventory? Should they throw it away or do they need to be careful about what they do with it?

A. At first there is a red label that must be attached to the unnecessary inventory, machines or jigs etc. Those things must be moved to the red label storage area at first and then we should evaluate whether they are truly unnecessary or not. If there are defective units amongst the inventory then this dead stock must be abolished. Even though the same unit is being utilized within the plant if they don't need that much inventory of it then that excess inventory much be moved to the red label storage for a while.

Q. Do the workers really need to understand why they are doing this?

A. At first, people often say its laborious and don't want to do it, just like children at home who don't want to clean their room. However, unnecessary inventory must be reduced. When only the necessary things are left we can then apply the Kanban card system. After the red labels are pasted and the unnecessary things are abandoned, the remaining necessary things must be rearranged. The first step was Seiri and then the next step is Seiton. This is important for 5S. Seiri is just to remove the unnecessary things and then the necessary things that were left must then be rearranged in order to use them easily. The Seiton must be carried out after Seiri has been finished.

Q. How should Seiton be performed?

A. To carry out Seiton we make use of the indicator plate (see figure below), which has such information as the address of the shelf, the vendor name of the parts, item name and item code number. We also mark the MAX inventory and the MIN inventory levels as well. The MAX inventory is equivalent to the lot size, when we apply Kanban card system, and MIN inventory is the re-order point. When the parts are completed then they are stored here and the people working on the subsequent process will bring their Kanban card and take out the completed parts from this storage. Then, the level of the inventory will decrease to the reorder point and the lines here will start production. This indicator plate for Seiton is linked closely to the Kanban card system. This is a part of the 5S movement. For inventory reduction itself, if we reach this level then the necessary inventory does not exist in this storage and we can shorten the lead time because the inventory carrying time was reduced. When we promote the 5S then eventually we can reduce the lead-time because the inventory size is reduced. Seiton is also the prerequisite to shortening the setup time as well. When carrying out Seiton, mark the location where everything should be. For example, equipment that we use in the plant, such as a forklift truck must have the location that it is placed in determined and then marked with white lines. This is also part of the 5S movement.

Figure: The indicator plate and indication of max and min inventory quantities

End of Part One . . .

Please click below for Part Two of the Implementing the TPS interview.

Implementing the Toyota Production System (Part Two)

Interview by Lean Manufacturing Japan editor Warren Harrod

Implementing TPS: Part Two - Introduction of 5S (2)

2008-11-24T13:46:29Z

Toyota Production System

Implementing the TPS: Part Two

Relation between 5S and Kanban card system:
Q. Is the location of inventory also important?

A. Each process should have its own inventory. Whenever we have a small lot production, which is conducted if we can't make one piece production, the lot size is small but usually there is a storage location. The workers bring the Kanban card to this storage and they pick up the completed part with their Kanban card installed to each parts box. The kanban card and the indicator plate are different.

Q. Does the Kanban system require the 5S system to be in place?

A. The 5S movement is certainly a prerequisite for the implementation of the Kanban card system. We can not implement a Kanban card system without carrying out 5S. If the inventory is reduced by 5S then it doesn't just mean the reduction of capital cost (interest), but also the inventory itself is holding some amount of fund then if that inventory is reduced then that fund can be pooled, and the cash outlay put into that inventory can be reduced. Furthermore, the production lead-time will be reduced, the lead-time consists of inventory carrying time + processing time and conveyance time.

Q. Once they have finished the Seiri and Seiton they have the 3 other Ss. What about Seiso? Are there any special methods they should adopt for good ways of cleaning?

A. There are many examples of good Seiso. You must devise something to handle the metallic powder created from the machines in order to ensure that this powder does not spread. Seiso involves not just cleaning but also reducing the time spent for cleaning. This is a kind of kaizen. It's the responsibility of the person using the machine to try and reduce the spread of this powder. Furthermore, some machines may also leak oil and some machines are always dirty with metallic powder. In these cases the machine may stop working, break or produce faulty parts. So, Seiso can lead not only to the overall improvement of efficiency but also improve safety as well. If the oil is always leaking then the floor is very slippery and could cause an accident. 5S is not just about reducing costs but also about improving worker safety as well. But from the viewpoint of JIT, I want to emphasize that although there are many good things to come from 5S the most important points are the production lead-time reduction.

Q. What abut Seiketsu and Shitsuke?

A. Seiso, Seiketsu and Shitsuke are all closely related. Seiso, to continually maintain tidiness, depends on Seiketsu which is to standardize cleanup activities so that these actions are specific and easy to perform. Shitsuke is a kind of habit of doing the 5S movement. When we start the 5S movement we should go through the steps one by one, Seiri, Seiton etc., but there must be a kind of cycle. A big Seiri and Seiton project could be done probably twice a year. It is very laborious so people don't like to do Seiri and Seiton but cleaning up is very healthy and good for everybody. However, although people say that the appearance is good it has nothing to do with cost reduction. That is a misunderstanding.

Q. What kind of schedule should the project team set for the 5S milestones?

A. It's not necessary to completely do the 5S in one go. Step by step unnecessary things could be abolished. For instance, in the beginning just 50% accomplishment is OK and then they could gradually continue to complete the rest. There are many things comprising of unnecessary things such as inventory, materials, WIP, jigs, tools, machines etc. We are not required to apply 5S to all of these things at the same time. In addition, we don't have to undertake 5S at all the plants at the same time. First of all, do only one plant, and then next time do another plant.

Motivation:
Q. How often should 5S be performed?

A. We should continuously conduct 5S even if it is not the initial project, otherwise gradually things will return back to how they were before. Rather than trying to do it all in the beginning and then stopping it would be better to start with one part and then continue to keep improving. However, at first we should implement a big 5S movement.

Q. In the beginning it may be easy to improve the shop floor with 5S but as time goes on it will become more difficult to keep improving? What things can they do to keep the 5S going?

A. This is a part of Shitsuke, motivating workers to perform maintenance and continuous improvement activities. Encouragement of the workers is very important but Shitsuke is considered the most difficult part of 5S. One way we could do this is by comparing the past with the present by using point photography (see figure below), a method of taking photographs of the same position from the same direction. These photographs are then continuously pasted on the company notice board for all the workers to see. This motivates the workers to continue improving by evoking feelings of pride or shame in them. However, as things progress it will be harder to make improvements so in each process the supervisor will add comments to show where things can be improved. It is the job of the project team to take these photographs.

Figure: Point Photography method.

Q. What opportunity do the workers themselves have to contribute to the process?

A. In the beginning the workers must participate in an in-house seminar for TPS itself and 5S as well. Theoretically, their personal goal must be congruent to the company goal. We call this GOALS CONGRUENCE. That is very difficult but important.

Q. What goals should the company establish for their 5S to achieve?

A. One company I know established a space goal. If we remove the unnecessary shelves, machines and inventory etc then we can have more space from where the unnecessary things are removed and free up space. Thus, we can have a space goal (in square meters). Normally, space itself has nothing to do itself with cost reduction, although lighting (energy) may be reduced.

Q. How should the company organize the QC Circle?

A. A Japanese QC (Quality Control) circle is equivalent to a team in the formal routine line. The foreman supervises 3 or 4 teams and each team will have its own team leader. The team leader is not a formal supervisor. The 5S and Kaizen movement is conducted after the regular labor hours, usually 3 times a week after work. It's very laborious, but it takes place for only about a month whilst the 5S is being undertaken.

End of Part Two . . .

Part Three of the Implementing the TPS interview coming soon.

Interview by Lean Manufacturing Japan editor Warren Harrod

Flow of PC Production

2008-12-09T06:53:41Z

Operation Flow of Whole Factory

2008-12-09T07:00:50Z

Flow of Material and Information through the Factory

2008-12-09T07:04:05Z

Flow of Product to Consumer

2008-12-09T07:05:43Z