The approach that is taken to Lean Operations this week is that it is a philosophy of management that will influence how operations take place across the organisation. It will influence the way that work is organised and the way that people are managed. The following video provides an introduction to lean operations:
This posting discusses lean as a philosophy and the involvement of people in lean operations. It explains how a pull system works and the key concepts in the Toyota Production System. It examines the attributes of a lean supply chain and the principles of supply chain design. We will also look at the application of lean operations concepts in a service operations context.
Scientific Management
Operations management in most industrialised countries has been predominantly based on the principles of scientific management that were first applied on a large scale by Henry Ford and Frederick Taylor in the early 1900s. The following video outlines this approach:
Taylor emphasised the division of the planning and execution of work. A small number of more highly paid workers would undertake planning and specialist tasks while the majority of workers would undertake simple repetitive tasks that were easy to learn. Management would ensure that people worked hard and measurement and norms would establish the standards that had to be achieved in the work pace and output.
“The general expectation of the scientific management approach was that by simplifying jobs, work could be carried out more efficiently; less skilled employees would be required; the control of the management over production would be increased; and, ultimately, organisational profits would be increased.”
Hackman and Lawler, 1971
The International Labour Organisation commented on this approach in 1979:
“Under this system the operative is regarded as a person of a very low intellectual and educational level, a waster with an innate tendency towards low output, needing regular pacing to overcome habitual apathy, and requiring close supervision, but capable of positive motivation through payment by results.”
The Human Relations School
By the 1950s this approach had started to be criticised. The Human Relations School argued that jobs should be designed to improve employee motivation, satisfaction and performance. They argued that scientific management leads to dissatisfaction and lower levels of performance. Douglas McGregors Theory X and Theory Y description of managerial types was part of the Human Relations School. His theory X type was aligned with the scientific management model:
Socio-technical Systems
Another school of thought also emerged in the 1950s, Socio-technical Systems. They argued that the human relations theory was too narrow and that it assumed the nature of production technology determined employees’ job content. The socio-technical school argues that work is a combination of social and technical systems and that our aim should be to optimise these together – that manufacturing design should take into account both systems.
The socio-technical systems approach has been used in the design of many manufacturing operations. General Motors’ Saturn manufacturing plant and Volvo’s facilities at Uddevalla and Kalmar are popularly reported examples. The following video describes the Volvo Kalmar operation:
Volvo’s plants closed some years ago and research has been inconclusive on whether they were more or less financially successful than a plant based on scientific management.
Lean Operations
Socio-technical systems theory was developed in the 1950s, when the dominant view of operations management was based on scientific management. Today our views of operations are also influenced by theories arising from lean operations that incorporate many of the elements of socio-technical systems. The following video provides an overview of lean operations:
The West’s understanding of lean operations was strongly influenced by a book published in 1990, The Machine That Changed the World by Womack, Jones and Roos. The statistics produced at the time showed the dramatic differences between Japanese owned automotive companies in Japan and the USA, American owned automotive companies and European owned automotive companies as the following two charts demonstrate:
Toyota have been credited with being the initiators of lean operations and their continuing success with its application has now made them the largest automotive producer in the world. The following video provides an overview of the operation of their Canadian facility:
In 1987 Voss provided a definition of lean manufacturing which remains appropriate today:
“a disciplined approach to improving overall productivity and eliminating waste. It provides for the cost effective production and delivery of only the necessary quantity of parts at the right quality, at the right time and place, while using a minimum amount of facilities, equipment, materials and human resources.”
It requires:
“total employee involvement and teamwork”
Dell are also a company that have been recognised as having a lean approach to their business with particular emphasis being placed on their lean supply chain as the following video shows:
Bhasin and Burcher conducted a review of the literature on the lean philosophy in 2006. They found the following elements as common features:
Decisions at the lowest level: employees are empowered to make as many decisions as possible
Clarity of lean vision: effort is made to ensure that the lean vision is clear and widely understood within the organisation
Strategy of change: Understanding that lean is a continuous process of improvement
Clear responsibilities: Job roles and duties are clearly and explicitly defined
Supplier relationships based on trust and commitment: Positive collaborative, long term relationships with suppliers
Learning environment: An understanding of the importance of education and training to employee performance and motivation
Focus on the customer: A wide understanding that the focus of the lean operation is the customer
Lean leadership and metrics: An appropriate management style and metrics that support lean objectives
Maintain challenge of existing processes: Continuously seeking to improve processes
Maximise stability: In demand and scheduling and for employment and security of employees
Assess fraction of employees operating under lean conditions: As part of the movement from scientific management to lean
Long term commitment: To the lean journey and this is well understood throughout the organisation
Working in a Lean Environment
Working in a lean environment is very different than within a scientific management environment. There is greater flexibility of activity as work is focused on the needs of the customer and the demands that this places on the organisation. There will often be greater flexibility of employee numbers with the use of temporary employees. Employees will have more responsibility for product quality, as we saw with Total Quality Management and they will have more involvement in improving the product and the production processes. They will usually work in teams and undertake a wider range of maintenance duties and there will be more disciplined adherence to production demands through kanbans or schedules.
The working conditions in Japanese production systems are also significantly different. Typically there is lifetime employment, providing a high level of job security. Pay and promotion are often based on seniority and there is better education and training. Companies provide good welfare facilities and there is a single level of employee status. Unionism is usually company specific with unions or associations for that specific company.
As Pang and Oliver wrote:
“What is noteworthy about the successful Japanese companies in general is the goodness of fit between the strategies employed by their various constituent parts, particularly the fit between their manufacturing strategy and their human resource strategy.”
The following video discusses lean in a union environment:
While many argue that working in a lean environment can be a positive experience, it has also been argued that negative aspects may also exist. Those taking this position have called it Management By Stress:
The Technical Side of Lean
Lean is focused on integrating activities in the production process and producing products with a minimum level of raw materials, work in process and finished goods. It is based on the elimination of waste and just in time production where downstream processes “pull” material from upstream or previous processes.
The production process is viewed as a value chain and studied and improved to eliminate non-value adding activities. Value is defined as customer value for which the customer is willing to pay. Waste is activity that does not contribute to customer value.
Lean Supply Chain Design Principles
Lean supply chains are based on three main principles, lean layouts, lean schedules and lean supply chains.
Lean layouts refer to the use of group technology or cellular manufacturing, quality at the source and the reduction of reliance on inspection and a just in time system of pull flow.
Lean schedules focus on level loading of plants and the use of kanbans.
Lean supply chains have focused factories that produce a limited variety of goods or services, close collaboration with suppliers and a focus on applying lean principles to the whole supply chain, not just one stage in it.
Group Technology
Group technology is an important part of lean which is based on the grouping of equipment and machines. In a traditional environment machines are usually grouped by function and feature high levels of inventory and a lot of wasteful movement of product. Group technology (sometimes called cellular manufacturing), groups machines into product families where all or most of the work can be done to produce a finished product. The following video provides an introduction to group technology:
Just In Time Production
Just in time production means that you only produce when an order is needed and only what has been ordered. Anything else that is produced is seen as waste. It is often applied to repetitive manufacturing but has also been applied in a wide range of other environments. It usually means that suppliers will make deliveries more frequently and as inventory is reduced problems that exist within production, that have been hidden by the excess inventory, will appear.
The following video considers lean in an office environment:
Scheduling and Lean Production
Scheduling in lean production is designed to make the system work effectively. The schedule determines what will be pulled from the operation and in what order. It is designed so that operations can respond to the schedule. Freeze windows fix the schedule so that no changes are possible for a period of time. This provides production with a firm schedule and eliminates the impact of schedule variation.
Backflushing is used for accounting with inventory records being based on the number of products completed and the known bill of materials for each of these products. Individual parts do not need to be tracked or accounted for on the shopfloor. Uniform plant loading is also used which seeks to reduce the impact of schedule variation. Variation in the schedule can impact the supply chain as a whole as we saw in the bullwhip effect.
Value Stream Mapping
Value stream mapping is a flowcharting technique that is used to analyse the production flow. The following video explains:
Kanban
Lean operations product flow is based on “pulling” products through the operation, based on customer demand. Kanbans are a technique that allows that to happen. The use of a part or item of raw material is a signal to the upstream process to produce another part. The following video explains how a Kanban system works:
Lean Supply Chains
Lean supply chains tend to feature relatively small facilities that have a relatively narrow focus. This allows them to concentrate on a smaller range of products and functions and become very good at these. They are less likely to feature large vertically integrated manufacturing facilities.
Lean supply chains also feature very close collaboration between suppliers with extensive sharing of information and planning of supply chain activity. Information technology has facilitated this in an increasingly effective way in recent years.
Lean supply chains also focus on the reduction of waste. In the future more sustainable supply chain practices will feature. The following video considers the issues involved in the retail supply chain:
In order to build a lean supply chain collaboration should first identify customer value across the whole supply chain. This is an extension of the customer value concept from just one organisation. Collaboration on waste reduction across the supply chain should ensure that all supply chain organisations receive a suitable return on their investments in improvement. An iterative process of waste reduction should be undertaken across the chain, continuously improving supply chain performance. In order for this to be effective, there needs to be transparency across the supply chain and a willingness to share all relevant information.
Lean Services
Lean is now being applied extensively in service environments. Some of the ways that they are doing that include participating in group problem solving, conducting office 5S, mapping and improving process flows etc.
The following video focuses on Lean Six Sigma:
Summary
This week focussed on lean operations. The history of lean and its overall philosophy was explained. The concepts behind the Toyota Production System were outlined and discussed and lean supply chains were introduced. Finally lean as applied to services was reviewed. The following video provides a humorous depiction of lean:
Operations and Supply Chain Management 