Lean MADE YOUR WAY

Industrial Engineer, Feb 2008 by Lane, Greg

One method does not fit all

TOYOTA DIDN'T START OUR MAKING CARS ON A CONVEYOR line or establishing a groundbreaking production system, though today most lean thinking is based in some way on this model of high volume with basic variations on the same base product. Still, one size does not fit all. Prior to the creation of the company's famous automotive production system, which is credited to Taichi Ohno, Toyota was evolving its processes in a machine shop with considerably greater overall variation in work content.

One problem that has arisen is people's awareness of only the highly publicized tools of lean that are based around this successful example of high-volume production from the automotive industry. One area in which these traditional lean tools do not directly apply is high-mix, low-volume or make-to-order environments. However, the underlying lean philosophies do work if tailored to fit a company's particular business parameters.

Although the example that follows is based in manufacturing with the focus on improving lead-time and productivity, it represents one way to sense if customer expectations are being met. The following discussion models a quotation department, which has the direct link with the customer. Workers in this department communicate requirements via the work order, a document authorizing production that contains due dates, routings, and working times. This example can be extrapolated to service orders and call center logs.

Before starting this discussion, there are a few necessary clarifications: high-mix, low-volume refers to companies that have hundreds to thousands of active part numbers or required services for which few, if any, have ongoing forecasted demands and the work content can vary dramatically. Orders are usually not predictable and, subsequently, planning is short term.

To simplify the discussion, let's assume the businesses in which we are going to apply lean are make-to-order, in which specific actions are taken only after a customer order is received. This can apply to a range of companies, including those that offer a wide range of products or services in a catalogue but do not stock completed products as well as basic job shops that quote and build to specific customer requests. Throughout this discussion, these types of businesses will simply be referred to as "make-to-order."

Figure 1 shows some of the basic differences between traditional lean thinking and make-to-order lean thinking. As noted already, a major distinction of make-to-order environments is that each product is, in some fashion, quoted for the specific customer, and the batch size is usually determined by the customer order. This is different than producing a higher volume of similar products in a batch size, which the manufacturer determines. Therefore, production is already just-in-time, so the important variable to control is time.

High-volume plants include dedicated processes to one product or several product families; make-to-order plants share processes among a high mix of parts where process demand is continually changing based on customer needs and specific routing of various work orders (Figure 2).

Look at the various flows the work orders take. People who are familiar with value stream mapping can see why it is difficult to apply immediately. The next step after establishing the correct metrics is to focus on the customer expectations set forth in the quote. Measure the follow-through of those expectations. Later, when waste has been reduced and you better grasp the data on the shop floor, apply value stream mapping to reduce lead-time and cost.

Change in made-to-order environments

Since make-to-order businesses are made up of many smaller orders, the overhead burden increases more than in a high-volume environment of standardized products and orders. That said, each company must look at its current business plan and decide where the bottlenecks are in executing change. For example, are there more constraints in the office and administrative functions or in the production or service areas? Based on the location of bottlenecks, choose which area to work on first (Figures).

Whether you choose to begin in the production or office areas, a critical evaluation to make is whether the correct metrics are being used in the business. Although there are strong arguments that profitability is a result and should not be the primary metric when you need customer-focused measurements, this paradigm shift may be too intensive as a first step. Using financial and non-financial measures at higher levels in the company and undertaking strategic deployment to identify non-financial measures throughout the organization is a more suitable approach.

In make-to-order environments, metrics must have a different base line. One example is to measure how well each work order is executed in relation to its lead-time and cost. The cost set forth in the quote is based on materials and time; therefore, that time should become the standard. Once each work order contains the particular terms a customer has agreed to, you must understand how the organization plans, executes, and achieves these expectations and then resolve any problems encountered. Additionally, ensure the work order contains the routing and working time for the operations involved: Financial numbers are meaningless to the planning and operations people.