Lecture Notes
Chapter 14: Lean Operations And Supply Chains
Learning Objectives
•	Define lean operations.
•	Describe the philosophy of lean systems
•	Outline the elements of lean operations systems.
•	Apply lean ideas to service operations.
•	Identify the characteristics of a lean supply chain.
•	Explain why it is so difficult to make global supply chains lean.
•	Discuss how sustainability initiatives can be considered to be an extension of the lean philosophy. 
Operations Profile: Lean Operations At Rolls-Royce Indianapolis 
•	Rolls-Royce is one of the world’s leading manufacturers of jet engines.
•	Since 2000, Rolls-Royce has invested nearly $100 million in modernizing their manufacturing site, including implementing a series of lean manufacturing initiatives.
•	The decision by Rolls-Royce to adopt lean operations has paid off handsomely. 
•	The company has surpassed Pratt & Whitney and is now the second-largest supplier of jet engines in the world, behind General Electric.
Introduction To Lean Operations
•	Lean philosophy holds that any activity or process that does not add value to the product or service wastes resources and, therefore, should be eliminated.
•	Just-in-time (JIT) strategies delays receiving raw materials or inventory from its suppliers until right before they are needed for production.
•	Lean production and just-in-time concepts became important in the early 1970s, after Tai-ichi Ohno, a longtime employee and executive of Toyota, used them to propel the automaker to forefront of its industry.
The Philosophy Of Lean Systems 
•	In the original Toyota lean model, three types of waste were identified by their Japanese names:
•	Muri means waste and decreased productivity that results from the unreasonable work managers impose on people and machines because of the poor design of systems. 
•	2. Mura refers to unevenness in the production process, out-of-balance workflows, and uneven workloads. 
•	3. Muda is any wasteful activity that does not add value or is unproductive.
Nine Common Sources Of Waste
•	See Table 14.1 Nine Common Sources of Waste.
Five S (5s)
•	Sort and separate. Sort out and retain everything that is needed for the work area. 
•	2 .Simplify and straighten. Organize and arrange what is left into a logical pattern of work operations.
•	3. Shine. Clean the area daily. Eliminate all forms of contamination, dirt, refuse, or discarded materials.
•	4. Standardize. Make all activities standard and uniform. 
•	5. Sustain. Avoid deviating from the first four S’s, and embed these practices throughout the company’s operations.
Elements Of Lean Systems
•	Kaizen: The move to a lean process is ongoing. It is not a one-time activity. The Japanese term for continuous improvement is kaizen.
•	Incrementalism: Improvement may not come from any one big fix, but from a steady stream of small adjustments. 
•	Dependence: The processes are usually linked together in some way, which means that adjustments to one element in a process (improving one step) will have implications for other steps in the chain. 
Workflow And Throughput
•	Workflow simply describes any process that consists of a sequence of connected steps, or operations necessary to complete a task.
•	Throughput is a measure (usually in terms of time or units) of how an order moves from receipt to delivery. 
•	Organizations constantly evaluate their throughput to detect inefficiencies or errors that cause delays and add costs. 
•	In the case of an emergency room, the hospital strives to eliminate unnecessary delays at any stage that force patients to wait to complete the necessary steps in their treatment.
Pull Systems Versus Push Systems
•	Push systems are systems in which services or products are produced based on forecasts.  
•	That is, a certain amount of the good is produced before customers actually demand it. 
•	In pull systems, by contrast, the product or service is only produced after it is ordered, not in advance. 
•	Pull systems characterize the lean philosophy.
•	Push systems depend on good planning and stocking the product in advance.
•	Deciding whether to use a push or pull system depends upon an organization’s operating philosophy or type of industry in which it competes.
Focused Factories
•	One useful option for eliminating waste and making operations more efficient is the creation of focused factories, or specialized plants that are built and operated for a single purpose. 
•	For example, a focused factory for Samsung might make only LCD televisions, rather than the full range of Samsung’s electronic products. 
•	The narrower focus of these factories can lead to greater efficiencies. 
•	Focused factories also do not require as many workers with multiple skills.
Value Stream Mapping (Vsm)
•	A company’s value stream is best understood as the sequence of activities required to design, produce, and provide a good or service, and along which information, materials, and workflow.
•	Value stream mapping (VSM), which is a prerequisite to converting to a lean system, can enable managers, production workers, and suppliers to identify waste and pinpoint the causes of it. 
•	The method involves creating a visual map of the production process that shows its cycle time, downtime, work-in-process inventory, movement of materials, and information flow.
Value Stream Mapping (Vsm), Cont’d
•	See Figure 14.1 Completed Value Stream Map.
Quality And Lean Systems
•	Total quality management or TQM includes a number of elements, such as worker responsibility for quality, statistical quality control, the use of fail-safe methods, and systematic or automatic inspection of the manufacturing process. 
•	Built-in quality and defective-free processes are absolute prerequisites for lean operations. 
•	The use of Six Sigma methodology, improved product design, standard product configurations, and fewer parts reduce the variability both in the product and process, and improve quality. 
Lean Six Sigma
•	Many leading companies that have used both lean and Six Sigma methods in the past for operational improvements have combined the lean methods and Six Sigma approaches, now referred to as Lean Six Sigma, to realize innovations throughout the enterprise that extend beyond operational improvement. 
•	Lean Six Sigma approach draws on the knowledge, methods, and tools of both the lean and Six Sigma approaches derived from decades of operational improvement, research, and implementation. 
Quality At The Source
•	The Japanese word jidoka, or quality at the source, means doing it right the first time and stopping production should something go wrong. 
•	Workers are personally responsible for the quality of their own work. 
•	If someone finds a quality-related problem, she is empowered to stop the process by turning on a visual signal. 
•	The purpose of stopping the process is to prevent the defective parts from moving forward in a manufacturing facility.
Plant Layouts That Balance Workflow
•	The goal of a plant layout in lean operations is to design it to achieve a balanced workflow. 
•	The plant layout design should also link the internal and external logistics systems to the layout.
•	Variations in production volumes are caused by such factors as late deliveries, machine breakdowns, quality problems, and poor worker performance. 
•	As a hedge against these problems, companies tend to carry inventory, which can be expensive.
•	Schedule stability is accomplished through level schedules, frozen windows, and underutilization of capacity.
Faster Setup Times
•	The changeover of equipment, tools, fixtures, and cleaning reduces a firm’s throughput. 
•	One way to shorten setup times is to differentiate between internal setups and external setups. 
•	Internal setups are activities that require machinery to be stopped or the process to be shut down for the setup work to be completed. 
•	External setups refer to work that can be completed outside of the process and do not require machinery to be stopped or the process to be shut down. 
Kanban Systems 
•	Kanban systems are manual control systems that use containers and cards. 
•	Kanbans are visual signals used to tell workers when it is time to get or make more of something. 
•	The production of goods and the delivery of parts are triggered by the demand from a firm’s downstream operations. 
•	Instead of a single card, many companies use a two-card kanban system. 
•	  See Figure 14.2 Two-Card Kanban System.
Reduced Inventory
•	An objective of lean operations is the reduction of inventory to the lowest possible levels: the continuous commitment to finding ways to reduce inventory, not just in the obvious places such as warehouses, but in other places where inventory can “hide,” such as on a firm’s plant floor, on carousels, on conveyors, or in transit. 
•	Large inventory savings cannot be realized without small and frequent shipments of purchased materials and components from a firm’s suppliers.
Improved Product Designs
•	Upgrading and improving the design and configuration of products is another element of lean systems. 
•	Although the application of lean techniques is used most typically in assembly-line flow processes, it can also be adapted to job-shop production processes. 
•	Settings of this type, such as factory machining centers or paint shops, produce a large variety of products in low volumes. 
•	The demand for products produced in a job shop isn’t as stable as it is for flow operations because the products are customized.
Lean Services
•	There are some important principles a service operation should follow to create a lean system. They include:
•	Pinpoint the Value the Service Offers
•	Identify the Service’s Value Stream
•	Improve the Flow of the Service
•	Be Prepared to Respond to the Pull from Customers
•	Pursue Perfection
•	Example of Southwest Airlines (SWA)
Notes:
Southwest Airlines (SWA) holds the unique distinction of being one of only a handful of steadily profitable airlines through the past decade. 
In addition, SWA has routinely held the “triple crown awards” of fewest customer complaints, fewest late arrivals, and fewest lost bags. 
SWA has eliminated services customers don’t value. 
For example, after surveying fliers, the company eliminated in-flight meals. 
Instead, the company worked harder to provide the services that customers do expect, such as courtesy, on-time departures, and trouble-free travel. 
Southwest Airlines has been adept at practicing lean service delivery and the results can clearly be seen in its steady profitability in an extremely difficult industry.
Lean Supply Chains
•	A lean supply chain is one in which the members work collaboratively to reduce cost and waste by efficiently pulling what is needed to meet the needs of the individual customer.
•	There are three types of flows common to all supply chains: product and service flows, information flows, and financial flows. 
•	In order to build a lean supply chain, the wastes associated with each flow should be identified and eliminated, and the fluctuations smoothed out. 
Lean Logistics
•	Just-in-Time (JIT) Delivery
•	Cross Docking
•	Vendor Managed Inventory (VMI)
•	Third-Party Logistics (3PL)
•	Supplier Parks
•	Approaches to lean logistics will continue to evolve as more and more companies embrace the concept of lean supply chains. 
•	Note that lean logistics approaches will work only if the supply chain members mutually reinforce and cooperate with each other.
Performance Measurement And Continuous Improvement 
•	Cost metrics assess material and labor costs, the costs associated with returns and repairs, interest, rent, and facilities, transportation, and storage costs. 
•	Efficiency metrics evaluate inventory turnover or days of inventory on hand, and capacity and capital usage (ROI or cash flow).  
•	Effectiveness metrics evaluate the percentage of orders delivered on time and customer satisfaction metrics, such as number of customer complaints and percentage of returned items.
•	See Figure 14.3: A Simplified Timeline.
Lean Global Supply Chains
•	It is often difficult to make global supply chains lean.
•	First, it requires coordination to establish the rapid flow of goods and information.
•	Second, the frequent and often daily deliveries for JIT are nearly impossible in a global setting.
•	Third, longer lead times are required, making low inventories hard to achieve, so firms need to carry greater amount of safety stock to avoid running short on goods.
•	Finally, the lack of face-to-face contact, time-zone differences, and cultural and language barriers can make global communication more expensive.
Applying Lean Practices To Promote Sustainability
•	Lean initiatives that improve sustainability
•	Fewer product defects
•	Eliminating overproduction
•	Minimizing wasted movement
•	Reducing transportation
•	Less excess inventory
•	Reduced waiting
•	Less over-processing