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Anbor Consulting S.L.

Germany
Muxelstrasse 4 81479 Munich Tel: (49) 89 74 99 77 55 Fax: (49) 89 74 99 77 54

Spain
Paseo de Gracia 21, 1 1 08007 Barcelona Tel: (34) 93 280 63 69 Fax: (34) 93 280 07 39 -

Edition 1, 2000

Newsletter
Mass Customization: Lean Practices to the Market Demand
Silent revolution is stirring in the way things are made and ser vices are delivered. Companies with millions of customers are star ting to build products designed for specific customer preferences. This trend is known as the world of Mass Customization, where mass-market goods and services are uniquely tailored to the needs of the individuals or companies who buy them. Mass customization is more than just a manufacturing process, logistics system, or marketing strategy. It is an organizing principle of businesses for the next century, just as mass production was the organizing principle in this one. It gives a vision, a business direction, a path for the companies. While mass producers dictate one-to-many relationships, mass customization requires continual dialog with customers. Mass production is cost-efficient in terms of machine utilization rates, but it is indifferent to the real customer demand. Mass customization, on the other side, based on Lean Manufacturing and Management is a flexible technique that slashes inventor y and has two big advantages: it is at the service of the customer, and it makes a full use of lean principles plus cutting-edge technology. Companies that pioneer mass customization enjoy optimized manufactur ing and distribution processes with no inventor y and delays in readjusting assembly lines. Lean production techniques are combined with computer-controlled equipment and
The New Market Frontiers
Changing customer

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Edit: Boriana Valentinova (Anbor Consulting, S.L.) Compose & Print:Tormiq, S.L.

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Please, send me more detailed material and information about:
u Anbor Consulting u Market Survey on "Lean Practices" u Lean tools u Lean workshops u Case studies u Additional copies of the newsletter

bar code scanners, which enables the company to track vir tually every par t and product. Cutting-edge software is not just nice to have and impossible to afford any longer. It is an integrated part of the stream towards perfection. One important component in this trend is the Internet. The Net makes it possible to move data from an online order to the shop floor. The Net makes it accessible for manufactur ing to communicate with marketers, resulting in a better overall service and relationship with the customers. The buzzword customer relationship thus becomes reality the products themselves are increasingly a commodity, which needs additional services to make a difference to the customers. Nowadays customers demand for more choices. The niche, specialized products, used to belong to a categor y other in companies product classification. Mass customized companies more and more are trying to produce a unique other for each of us, adding specific services to the product itself. One of the best - and most famous example of mass customization is Dell Computer, which has a direct relationship with customers and builds only the PCs that have actually been ordered. The company saw earnings increasing by 62% in the last year within a ver y tight and competitive industry. The main reason for this is the combination of understanding

client needs through the online order reception, one-piece-production and minimum inventor y levels through lean production techniques, fast delivery through optimized distribution channels, and modular assembly modes through lean product development techniques. A big advantage of the mass-customization is the speed with which a company can react to a changing demand. Par t of mass customization is treating customer s as being par t of you. Car manufacturers build more and more to order, since less and less customers seem to be willing to wait three to four months to receive their car. This market orientation is forced to suppliers who need to adjust their operations to changing demand and short lead times. The challenge in mass customization is that in making units of one, the margin for error must be 0. Custom-fit products or services must come with a money-back guarantee. Companies can not afford customers not to like them. O n e a d d i t i o n a l b e n e fi t o f m a s s customization is the value as it is perceived by the customer. If he receives exactly what he expects about additional features of the product, he will be willing to pay a premium for it. On more about Mass Customization and the path towards achieving it, please review our Internet site http://www.anbor.com.

My address
Company: Name: Position: Address:

Zip code: City Country

Email:
u Please, send a copy of this Newsletter to my colleagues:
demand

Changing demographics

Product saturation level

Focus on individual customers Reduce development cycle time Develop customized products or services DEVELOPMENT PRODUCTION MARKETING

Focus on individual customers Reduce production cycle time Produce customized products or services

Name: Name:
u I don't want to receive any further newsletter from Anbor

Decreased levels of input stability

Technological innovations

Economic cycles uncertainties & shocks Finance: Manager- & workeruseful information

The Lean Enterprise


Production: Total process efficiency & flexibility R&D: Continual incremental innovations

DELIVERY Focus on individual customers Reduce deliver y cycle time Deliver customized products or services Focus on individual customers Reduce selection and order processing cycle times Market customized products or services

Counsulting, please exclude my name from your database.


8

Marketing: Customer wants & needs first!

Market Survey on Lean Practices (summary 2)


Continuing our article from the previous edition of the Newsletter, here we describe another aspect provided by the results of the market sur vey on lean pr actices in selected number of companies in Europe. The sur vey topic was "How familiar is your company with the Lean Practices?", and its pur pose was to evaluate representative companies from the automotive and automotive supplier industr y in France, Germany, Spain and UK. Altogether 75 companies replied to the survey. In the sur vey par ticipated companies like: Adam Opel AG, Freudenberg, Vauxhall Motors, Siebe Automotive, TRW y Manufacturas Fonos, among others. The results from the sur vey let us describe and compare how companies work with lean practices, which results they have achieved and what they foresee for the future of Lean. UK companies again lead the way, with 87% acknowledging an impor tant improvement in their company culture after implementing Lean. This may be related to the success of the teamwork during the implementation and the overall cost reduction (shown in our previous newsletter edition) and therefore a greater embracing of the benefits achieved through the implementation of Lean Practices. There is always a time gap between the implementation of Lean Practices and an increase in market share. The initial goal is to make the production operations leaner, offer better conditions to the client such as: shor ter lead times, higher quality, greater flexibility, etc. Based on these advantages the market share of a company can grow and it market position be strengthened. As with the previous aspect, the graph Improved relationship with suppliers highlights the impor tance of not just settling at implementing Lean Practices, but also tr ying to educate suppliers in the benefits that can accrue to them. The UK companies show that despite being able to reduce their overall costs, there remains the problem of not seeing this advantage translated into increased market share or improved relations with their suppliers. Existing customers should be the first to benefit when a company successfully introduces Lean Pr actices. Each sur veyed countr y showed an improvement, with French companies leading the way 82% seeing improved customer relations. Existing customers w i l l fi r s t a c k n ow l e d g e i m p r ove d relationships. Again, combined with the appropriate sales and marketing effor ts the market share can be dramatically increased.

Bibliography and information about Lean and Lean related


One of the most impor tant aspects of a competitive company is to be updated with the latest information about the trends in the industry, the competition and the future expectations within the marketplace. One of the main characteristics of a competitive management is it tight agenda and little time to dedicate for research. In response to this situation, below, we provide you with some interesting tips about relevant sources of information about the latest in Lean: books, internet and events.

If you wish more detailed information about the survey, please contact our o f f i c e s : Te l . : + 3 4 9 3 2 8 0 6 3 6 9

Books
Title Author Description
Describes the world of mass customization, where mass-market goods and services re uniquely tailored to the needs of the individuals who buy them. The author shows the path towards achieving this competitive advantage. Learning to see: Value stream mapping to create value and eliminate muda. A Lean tool kid method and workbook. The founder of the Theory of Constrains shows a case story that describes the issue of the bottlenecks. Book based entirely on the theory of constrains (TOC) and its application. This book takes the reader through the steps to lean, from cultural issues, to mapping for continuous flow, to right-sizing machinery and quick set-ups, to kanban and material handling, to spreading the transformation from final assembly throughout the organization.

Mass Customization*
Improved company culture

Joseph Pine

90% 80% 70% 60% 50% 40% 30% 20%

87% 73% 55% 60%

Learning to See*

Mike Rother and John Shook

The Goal
27% 33% 18%
Spain

Eli Goldratt

Increased market share

13%
10% 0%

France Germany
80%

Lean Transformation
80% 64%
70%

Bruce A. Henderson and Jorge L. Larco

UK Yes No

64%

60%
60%

50%

27% 27% 33%

Internet
Author Address (bookmark)
http://www.ppress.com

40% 30% 20%

Description
Productivity Press is a big editor of books in the Lean field. Information about books, seminars, conferences, press articles, studies, etc.

20%

Spain France

Improved relationships with suppliers


10% 0% 80%

Germany UK Yes No

Productivity Press*

80% 69% 55% 55%

70% 60%

Anbor Consulting

http://www.anbor.com/links.html

36% 36% 33%

Our page contains ver y interesting links to different web pages with the latest information about Lean Practices and Mass Customization. Mass Customization is a trend in oper ational management to produce customized products. The philosophy behind it is to have flexible manufacturing system based on lean techniques, such as: pull, lower WIP, reduced throughput, etc.

50% 40% 30% 20% 10% 0%

20%

Spain France Germany UK


90% 80% 70% 60% 50% 40% 30% 20% 10%

Improved relationship with customers

Mass Customization

http://www.bus.utexas.edu/west /wwwboard/messages/57.html

82% 73% 55% 60% 27% 40% 20% 9%


Spain France Germany UK Yes No

Yes No

Events
Event
6th Annual Lean Manufacturing Conference May 1-3, 2000

Place
Dearbon, Michigan (Ritz-Carlton Hotel)

Coordinator
University of Michigan, Japan Technology Management Program and The Lean Enterprise Institute. For inscriptions, consult: www.umich.edu

In some of the graphs the total does not sum 100%. This is due to no answer from some companies.

0%

*Special recommendation

For more detailed information, please contact our offices. Phone: +34 93 280 63 69

A Practical Case Application of Value Stream Mapping in the Hardcutting Tools Industry
Market environment and company positioning:
The company is one of the mayor manufacturer s of hardcutting tools worldwide. Their 30-year old company histor y has been mar ked by a massproduction culture. As a supplier to the aerospace industry, the company was under pressure to improve lead times and delivery performance. After recognizing the need of optimizing the processes within the company, the management decided to implement lean management techniques. Specifically, the company decided to achieve process capability and create flow production. In order to assess the potential results, determine the areas for improvement and visualize the flow of the products, the management chose to map the value streams. The expected goals for the implementation of lean techniques were to: I. Reduce lead times by >70% II. Reduce inventory levels (raw material, WIP and finished goods) by >50%

...
Implementation areas:
In order to create flow, processes need to be robust and capable to handle smaller batch sizes. Reduction of changeover times are a main cornerstone to achieve this o b j e c t i ve . T h e r e fo r e , we a n a ly ze d changeover times of all types of machines and defined conser vative goals for their reduction. In most of the machines, a minimum of 37% was achievable only by a better organization of the changeover. Process Capability
x x

Implement 5-S to organize ever y workplace, thus reducing margins for errors, increasing operators ownership of wor k stations and make performance measurable; Increase machine uptime through TPM, in order to make cells robust for delivering products when needed Create Flow Implement mini-cells in upstream and downstream processes as a star t to create and implement one-piece-flow processes; If not in cells, create physical FIFO order, which cannot be altered; Suppor t the production processes by synchronizing information flow with material flow;

Introduce the concept of pull production and initiate its implementation together with the minicells; Decrease inventor y levels, which together with one-piece-flow lead to shor ter lead times.

Working approach:
Our approach to this project was to divide activities and processes into existing product families. Next we analyzed the information flow, the material flow and the takt time/cycle times. Information Flow
x

Shor ten changeover times, in order to maintain this activity at 10-20% of overall working time activities with more frequent changeovers; Implement visual plant techniques to make orders, machine conditions and operator performance visual and more controllable;

In order to achieve the future state, we identified 66 projects. Each project is a one-week Kaizen implementation to achieve specific results in clearly scoped areas of the plant.

and priority orders (stars, double-stars and SS). These delay the normal orders until they become urgencies as well. The result is a vicious circle for order priorities.
x

The WIP warehouse is a central storage point, which delays orders by average 8 days. Big inventory shelves in front of every depar tment give too much room for operators to combine batches, lengthening the overall lead times of individual orders. Changeover times are long, and therefore tried to be avoided on the shop-floor by combining batches. This delays delivery times.

The random timing of internal and external customer order s create information waves , which the plant currently absorbs by filtering the information before MRP-runs and scheduling activities. Thus, no FiFo can be maintained already at this point. Customer orders are processed in four different ways before their release to the shop floor. These operations are inefficient, and show the current thinking of planning for the exceptions. The weekly production planning activities, daily scheduling simulations and daily production control are not synchronized. Therefore, it is unpredictable at what time an order will touch the shop-floor. Long lead times and the above points result in the establishment of urgencies

Job orders are only tracked until the deliver y of the products to the intermediate warehouse. From that point onwards, not even the information system knows the lead times of orders. Job orders are delivered to the shopfloor in non-standardized quantities. Therefore, the lead times of every order may vary a lot from others, creating moving waves on the shop-floor.

Future State:
Synchronization Batch size reduction Standarditazion
SWS run Dally on 100% of orders. In secuence with MRP. Purchase Orders SWS run Dally on 100% of orders. In secuence with SWS. Drawings Production Control Serv. Orders Dally Issue Manual input of data into mainframe 1 x day Daily shipment request

Production leveling
Productions Orders Service Orders

Synchronization

Increase frequence or orders

Value added activities


x

Cell 1 FIFO 1 Cell 1


1/month

Orders

Cell 2 2 Cell 3 FIFO

Cell 3 1

The push-oriented system, coupled with urgencies and priority orders makes the lead times difficult to control. The control is currently performed through daily due date lists. The functional/departmental organization does not make any shop-floor employee feel responsible for the overall lead time of an order.

4/day
1

4/day
Cell 4 FIFO 2 FIFO
End Chamfer & Quality control

4/day
FIFO

4/day
Quality control
Making, Packaging

Cutting Cell 4

FIFO
Finished Goods

24h. operation
FIFO 1

HSS F>13,5 mm

After summarizing all these findings and calculating cycle and takt times we drew the current state of the value stream.

5S

Working-time synchronization

24h. operation
Quality control

HSS F>13,5 mm

Standarization
Automaitc Cell

FIFO 2 1

FIFO

Lead time 15 days


Standarization

Uptime

Tuming, Milling & Weldon Mini-Cells 5S Changeover

Uptime

Od, Flute, Face, Roughing & Relief Griding Cells Changeover 1 days

End & Chamfer Grinding Cells 5S 1 days


2.700 - 2.852 sec.

Value Added 359.000 sec.

Current State:
Drawings Orders SWS run (Scheduling) Job Releases Job Releases Suppliers

Estimated lead time

1 days 43-314 sec. 80-1.731 sec.

2 days 172.800 sec.

1,5 days

2 days 30 sec.

1,5 days

Clients

96-2.796 sec.

N/A depend on shipping frequency 2.700 sec. 2.700 sec.

Results:
MRP run MIS weekly F.G. Stock Check
Data entry into mainframe (Randomly)

Operational Improvements:
x

x x x

Net Margin: Liquidity test ratio: Inventory rotation:

+ 12,50% + 29%

ers Ord dule uctio Sche Prod aily kly-D Wee b n Jo

Daily schedule "Production Control Sheet"

Order Release Stock Check


MRP run for service orders (every 2nd day)

Average overall lead time: from 6 weeks to 15 days (-50%) Overall WIP in plant: -75% Reduced downtimes by preventive maintenance Productivity: +7% (not an initial focus of the project)

Employees began to identify themselves with the product and the company. The communication between management & employees, direct & support areas improved, creating a joint force to increase sales. Improved flexibility to respond to changing customer needs without long delays. In-house culture of par ticipation, collaboration and responsibility.

Ord e

x
eek 2/w

rR

ele

+ 28%

ase

2/day 2/day
Cut. & Tum. Weldon Counting CD
Flute & Relleef

4/day
End Grinding

4/day
Quality control

Intangible Effects:
x

Chamfer

Quality control

Sand Blasting

Marking

Packaging

Shipping

coating "WIP" "WIP" "WIP" "WIP" "WIP" Finish Goods Finish Goods

Employees have not had the chance to be actively involved in changes. The teamwork created by the Lean projects implementation empowered them to realize their ideas.

(20 days)

3 days

2 days

6,5 days

1 day

2 days

3 days

1 day

1-2 days
(estimation)

1-2 days
(estimation)

1 day

1 day

0-7 days
(usually)

39 sec.

40 sec.

97,200 sec.

90 sec.

300 sec.

331 sec.

60 sec.

10 sec.

97,200 sec.

60 sec.

19 sec.

39 sec.

Lead Time 29 days


Value-added 195.383 sec.

Financial Ratio Improvement:


x

Gross Margin:

+3,73%

2/w eek

Material Flow

We measured activities for the value added and non-value added times. For example, 96% of the lead time of one order for the most important client of the company were non-value added activities, with only 4% of value added time.

Cell 2 1 FIFO 1 FIFO

End Chamfer & Quality control

Reduction client types

Shipping

1/m onth

Leading Lean Transformation (Anbor Consulting & STG)


The Market Needs
We know that as a manufacturing company, you are faced with increasing quality requirements, changing market demand, delivery commitments and pressure from the companys financial goals for higher net profits and lower working capital, inventories, expenses, etc. You also have to have the time and resources to acquire new customers while assuring the loyalty and satisfaction of current ones.
x

Lean Tools

Reduce lead-time (the time it takes to fulfill an order), Reduce inventor y levels (all the money the company invests in things it intends to sell) and Reduce operational expenses (all the money the company spends in turning inventory into throughput).

Continuously involving multifunctional and multi-hier archical employees in any improvement activity. Orienting company's resources towards satisfying the continuously changing demand in the market (mass-customization)

In every edition of our Newsletter we will include this section with a description of a certain Lean Tool. We will comment on its application and usefulness. In this edition we are describing the "Value Stream Mapping".

Value Stream Mapping*:


The value stream records all the actions (both value added and non-value added) currently required to deliver the product to the customer in terms of physical material flow and information flow. The sequence of material and information flows is reflected through a value stream map.The best way to begin with the mapping is at the customer order reception.This order shall be followed all the way downstream to the issue of raw material order. The total time to complete the order from the client back to the client (lead time) is divided into the time for value-adding activities (those ones the client is prepared to pay for) and non value-adding activities (or waste). The ratio between these groups of activities usually is 90% non value-adding to 10% value-adding. Any lean implementation should focus on reducing the non valueadding activities, thus improving the overall performance of the company. The value stream perspective means working on the big picture and improving the total company, not just optimizing individual parts or processes of a company. There are two steps to deploy the value stream mapping: the current state and the future state. The current state visualizes how the company is operating today and helps to clearly identify areas for improvements. The future state draws the results of the implementation of the outlined improvements on the currentstate map, and it outlines further areas for improvement. Summarizing, the value stream mapping has the following unique characteristics:
x x

The Solution
Anbor Consulting is committed to implement all necessar y activities to improve the operational performance indicators through our specific Lean Management implementation and APS (Advanced Planning and Scheduling) technology. Our Lean Management implementation consists of:
x

Bias for Action


The above mentioned customer and company requirements need to be translated into operational performance indicators, and a bias for action and process control.That is, indicators monitoring the day-to-day process of converting raw materials into products that are delivered to customers and in turn converted back into cash and profits thereby returning the desired shareholder value. Any action of a manufacturing company should strive to control and improve the following indicators:
x

Through the APS Technology called OPT (registered trademark of STG) we offer discrete and process manufacturers a production planning and scheduling application that synchronizes and optimizes the process flow on a plant or supply-web level.The application not only identifies and exploits the constraining resources that govern the plant, but also ensures that all other resources are synchronized to suppor t these bottlenecks in an optimal manner. The combination of local optimization of processes using Lean Management Techniques, and the global synchronization of the process and material flow using APS Technology, results in World Class Organizations, offering firstrate customer ser vice performance and dramatic improvement to bottom line profits.

It forms the basis for an implementation plan the value stream maps become blueprints for lean implementation. It shows the links between the information and the material flows. It shows how you can change your company to be more flexible, focus on customer requirements and utilize your resources most efficiently. It gives a vision to the company.

Optimizing local processes in a transparent and pragmatic way. Delivering quantifiable and sustainable results. Using proven tools and concepts, for example: Jidoka, balancing and leveling, andon, equipment reliability, cell layout, one-piece-flow, SMED, kanban, 5-S, value stream mapping, etc.

It helps to visualize more than just a single-process level. It shows the flow. It helps to see more than non valueadding activities. It shows the sources of waste. It makes decisions about the flow apparent.

Understand and satisfy customer demand in terms of quality expectations, delivery times and value/cost pricing. I m p r ov e t h r o u g h p u t ( t h e r a t e b y which the company converts raw materials into products and sells them),

The Place
Anbor Consulting and its partners are present in Germany, Spain and the UK providing solutions for the global marketplace.

We recommend that you begin mapping a small portion of a value stream (one product line) and avoid the temptation to work with computer while drawing the value stream map. It should be done manually by using the items shown below to identify different issues within the operations and the information flows and build the current and future value stream map.

Legend to Value Stream Mapping Icons*


Material Icons
Quality control

Advanced Planning & Scheduling

Represents

Information Icons

Represents
Manual Information Flow Electronic Information Flow

General Icons
Search size reduction

Represents
Lean Workshops

Manufacturing Process Outside Sources


weekly schedule

Information Production Kanaban

Buffer or Safety Stock

Data Box

Operator

Process Improvement
4xday

Inventory

Withdrawal Kanban

Truck Shipment Movement of Production Material by PUSH Movement of Finished Goods to Customer Supermarket Withdrawal 0X0X

Signal Kanban

Purchasing

Process Improvement

Sequence-Pull Ball Kanban Post Kanban Arriving in Batches Load Leveling "Go See" Production Scheduling
*Source: "Learning to see" by Mike Rother and John Shook.

Process Improvement

Logistics

FIFO

First-In-First-Out Sequence

Manufacturing areas

Administrative areas

In the following pages we describe a practical case of how to draw value stream maps for the current and future states.