MSE507

Engineering
Management Lean Manufacturing

Chapter 1
Customer Value

"There is only one boss: the customer. And he

can fire everybody in the company, from the
chairman on down, simply by spending his
money somewhere else." Samuel M Walton
 Key Point

 Value is defined by the customer

Whenever there is a product for a customer,

there is a value stream.
The Challenge lies in seeing it…
 Module Goals

 Know
• Your external customers
• Your internal customers
 Feel
• Capable of talking to your customer
 Do
• Identify what your customers value
• Measure the delivery of value to your customers
 Results
Profitable Sales

Functional Silos Profitable

Sales
Quality Growth

Voice of Delivery
The
Customer Cost Control Customer
Satisfaction
Design

Knowing what your customers value enables you to…

• …build loyalty - penetrate deeper, retain more longer
• …win new accounts - keep them
• …make transactions easier, faster
• …add services, support - higher value
• …develop new products, services - higher value
• …enhance marketing programs
• …help customers succeed
 What do Customers Value?

 The technical performance or quality of a product is no longer

the primary determinant of customer value.
 Customers evaluate other "value factors“ such as:
• Delivery
• Total cost of ownership
• Data and information
• Value or solution bundles
• Business expertise

 What does your customer value?

 More importantly, what are you doing about it?
7 Types of Waste
 Lean Manufacturing Terminology

 Gemba or Genba: is a Japanese term meaning “the real place”,

In lean manufacturing, the ideas of Genba is that the problems
are visible, and the best improvement ideas will come from
going to the Genba. The Genba walk, much like Management
By Walking around (MBWA)
 3P: Production Preparation Process (3P) focuses on eliminating
waste through product and process design.
 Office Kaizen: Refer to the application of Lean / Kaizen
techniques to non-manufacturing areas or entire organization.
Kaizen is a Japanese word meaning “small, on-going good”
(kai) and “good, for the better”(zen)
 Heijunka: is the leveling of production by both volume and
product mix. This system does not build products according to
the actual flow of customer orders.
 Lean Manufacturing Terminology

 Heijunka takes the total volume of orders in a period and levels

them out so the same amount and mix are being made each
day.
 TPM: Total Productive Maintenance, Originated in Japan in
1971 as a method for improved machine availability through
better utilization of maintenance and production resources.
 In TPM the machine operator is trained to perform many of the
day-to-day tasks of simple maintenance and fault-finding.
 Poka-Yoke is a Japanese term that means “mistake-proofing”.
A poka-yoke is any mechanism in a lean manufacturing process
that helps an equipment operator avoid (yokeru) mistakes
(poka). Its purpose is to eliminate products defects by
preventing, correcting or drawing attention to human errors as
they occur.
 Lean Manufacturing Terminology

 The concept was originated, by Shigeo Shingo as part of the

Toyota Production System. It was originally described as baka-
yoke but as this means “fool-proofing” or “idiot-proofing the
name was changed.
 Jidoka used in the Toyota Production System (TPS) and
described as “intelligent automation” or “automation with a
human touch”. At Toyota this usually means that if an abnormal
situation arises the machine stops and the worker will stop the
production line. Automation prevents the production of
defective products, eliminates overproduction and focuses
attention on understanding the problem and ensuring that it
never recurs.
 Lean Manufacturing Terminology

 Takt Time: derived from the German word Taktzeit which

translate to Cycle Time, sets the pace for industrial
manufacturing lines. For example, in automobile manufacturing,
cars are assembled on a line and are moved on to the next
station after a certain time-the takt time. Takt time concept aims
to match the pace of production with customer demand.
 One Piece Flow: Henry Ford developed Mass Production
System. It is a tool that will help a manufacturer achieve true
just-in-time manufacturing. One-Piece flow means that parts
are moved through operations from step-to-step with no WIP in
between either one piece at a time or a small batch at a time.
One-Piece Flow is usually associated with low-mix, high-volume
manufacturing environments.
 Lean Manufacturing Terminology

 Water Spider: is an honored and critical role in making

continuous flow and a smoothly functioning Lean System a
reality.
 Kanban: literally meaning “singnboard” is a cencept related to
Lean and Just-In-Time production. According to its creator
Taiichi Ohno, Kanban is one means through which JIT is
achieved.
 7 Types of Waste

1. Overproduction - The primary waste

• Making parts faster than is required
• Excess Inventory
• Time wasted, that could be used to make product that is
required

2. Waiting
• An operator waiting for a long machine cycle to end

3. Transportation
• Moving parts and products does not add value - it just adds cost
 7 Types of Waste

4. Unnecessary Processing
• Booking work into a store and then having to book it back out
again to use.

5. Inventory
• There is a cost to the Company for carry inventory
• There is always the risk it can become obsolete
• It covers up other inefficiencies
e.g. Long set-up times
 7 Types of Waste

6. Unnecessary Motion
• Any motion of a person that does not add value
• Operators / Setters looking for tooling

7. Correction
• Reworking defective materials

 Things to remember about waste

• It is a symptom rather than a root cause of the problem
• It points to problems within the system, at both process and value
stream levels
• We need to find and address the causes of the waste
 Basic Roadmap

Identify Customer Value

Understand and Define

Entire Value Streams
Vision (Strategic Business Plan)
Deploy Key Business Objectives
- Measure and target (6 metrics)
- Align and involve all employees
- Develop and motivate
Continuous Improvement (DMAIC)
Define, Measure, Analyze, Improve
Identify root causes, prioritize, eliminate waste,
make things flow and pulled by customers

Control
-Sustain Improvement
-Drive Towards Perfection
 Cautions
Never, ever assume that…

 You already know what the customer wants.

 Marketing and sales people “know the customer”
• Unless they have a defined program of regularly asking the
customer what they want.
 Customer’s requirements are the same as always
• They will change over time
• We need to monitor and track
 You understand why customers do what they do.
• What drives them?
• Ask customers directly; do not assume you know.
 Quiz Time
Do you…

 Have management commitment and involvement?

 Have a defined list of your customers?
 Ask your customers what they value?
 Ask your customers the importance of those values?
 Ask your customers how you perform?
 Map the flow of value to the customer?
 Measure your performance in delivering value?
 Know how your performance affects the company?
 Know your competitive advantage?
 Use this information to prioritize OpEx projects?
 Have a defined program for continuous improvement?
 Basic Plan

 Identify your customers

 Ask the customers what they value
 Map your value stream
 Measure the delivery of value
 Make continuous improvements
 Identify Your Customers

 External
• Consumers
• Distributors
• OEMs
 Internal
• Next process
• Shipping
• Management
• Inspection/audit
 Other
• Employees
• Suppliers
 Be Customer Focused

 Make a list of all customers

 Put the list in order of priority to your process
• The most important customer is often the next process
 Post the list in the work area
• Be aware of all customers
 Ask the Customer
Ask Yourself 3 Questions

1. What do you want to know?

2. Who do you want to know it from?
3. What are you going to do with the information?

 If you cannot answer question 3, you should not bother asking

questions 1 and 2.
 Ask the Customer
General Questions

 What is most important to them?

 What would ‘make their day’?
• What would utterly delight them?
 What would differentiate you from the competition?

 Use open-ended questions.

 Ask the Customer
Standard Questions

 How important to you is [OTD]?

 What do you mean by [OTD]?
 How do we perform on [OTD]?
 What do you do if we don’t perform?
 What impact does non-performance have on you?

 Ask for each factor of interest to you.

 Use a scale of 1 (low) to 9 (high)
 Ask the Customer
Process

 Openly state your purpose for asking questions

 Do more listening than talking
 Do not be defensive, take criticism graciously
 Probe for explanations; ask “why” five times
 Do not try to ‘sell’ the customer, just gather data
 Ask the Customer
Report Findings – 2x2 Grid

Customer Ratings
OTD Leadtime Quality Cost
Importance to Customers

We're Better ----- They're Better

 Map Your Value Stream
6 WEEK Production 90/60/30 day
Forecast Control Forecasts Customer

ekly MRP
Suppliers We ax Order Entry
F Demand = 45 per day
Orders/day 2 shifts
= 36 Takt Time
Lead Time - 34 Days Queue = 18.2 Minutes
WEEKLY SCHEDULE = 1.5 Days
Competitive Lead Time
= 3 Days

1X
Daily

I
Coils Stamping S. Weld # 1 Assembly Test Shipping
5 days I I
342 I I I
81 122 90
202
CT=1sec CT=3 min CT= 15 min CT= 67 min CT= 4 min Lead Time
Co=1 hr. Co=10 min. Co=0 min. Co= 23 min Co=0 =23.6 days
Uptime=85% Uptime=70% Uptime=100% FTY = 67% Uptime=100%
2 shifts 2 shifts Touch Time
1 shift 1 shift 2 shifts
= 89 min

5 days 7.6 days 1.8 days 2.7 days 4.5 days 2 days
1 sec 3 min 15 min 67 min 4 min

Transducers Current State Map 2002-07-15

Measurements:
 Coils:
Supplier  Dielectric
 Resistance
 Rotor & Stators:
 Critical Dimensions
 Resistance at sub-
assembly level
 Epoxy coating coverage at PO Release by Buyer, Kanban, Min-Max
supplier level Bins supplier filled
Customer
Carrier

Order Entry Process

thru contracts into
Oracle
Receiving Oracle
Work Order Releases by Planner
(Central Insp if req'd)

Monthly Schedule Purchase Order by Planner

Shipment
Report
Stores

Ship Date is close

Measurements:
Carrier
 SPC Data taken at:
CTS:  ?Transducer final test
Measurements:  FTY Data taken at:
Kit  OTD
 Quantity of kits assembled vs. the  Transducer final test
number of correct kits CTQ:
 No handling damage  OTD
 Working Unit to customer spec  OEM Returns

Measurements:
 Coils:
 Stator teeth diameter
Work Order
 Stator bearing diameter RPM - 0-2000 <2PPM
 Stator bearing T.I.R. Hz - 2Hz-300KHz <2 PPM
 Rotor Bearing diameters OscilloscopeVoltage - 5m/div -20v/div, +/-3%
 Rotor bearing T.I.R. Dielectric Tester and Megger, 60Hz
 Rotor Teeth T.I.R. VDC 0-750 +/- 10% FS
 Alignment of Rotor and Stator VAC RMS 0-750 +/- 10% FS Measurements: Shipper
teeth mA, 0-10 +/-5% FS  Laser: with W/O
MOHOMS, 0-300 +/-5% FS  Within specification laser
Resistance Ohmmeter, Ohms, 150-250 +/-1% identifications
FS

1) Stator Winding Installation of Transducer FF

Stator Rotor Housing Transducer Laser
2) Coating connector & Shipment Final Inspection Shipping
Assy 3) Weld exciter ring Assy torque Test (if needed)
mount process to Final
 Measure the Delivery of Value
First Time Yield

Percent
400 101%

100%
350
99%
300
98%
250
97%
Hydro-Aire
Qty Tested - 39-353 Cell Date
Qty

200 96%
Production
Qty Passed Schedule - Orders for March 2001
1. 39-353 4. 7. 10. Crew Size
95% % Passed Plan Actual
150
2. 5. 8. 11. 1
94%
100 3. 6. 9. 12. Takt Time 32 m ins
93%
Time Work Interval Cum ulative Comments
50 Start Stop Min Plan Pcs Actual Plan Pcs Actual Variance
92%
6:45 9:00 2:15 4 4
0 91%
9:00 9:15 0:00 0 4 Break
APRIL MAY JUNE JULY AUG SEPT
Month 9:15 11:25 2:10 4 8
11:25 12:05 0:00 0 8 Lunch

12:05 13:20 1:15 2 10

13:20 13:35 0:00 0 10 Break

13:35 15:00 1:25 3 13

15:00 15:15 0:00 0 13 Clean up

Total 7:05 13 13
Make Continuous Improvement
ON TIME DELIVERY - Los Angeles
Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Target 94.0% 94.2% 94.4% 94.6% 94.8% 94.9% 95.0% 95.1% 95.2% 95.3% 95.4% 95.5%
Actual 94.1% 95.8% 93.0% 95.5% 95.5%

Definition
The percentage of sales order line items that ship complete on or before the original customer promise date, for all line items shipped in the month at the Los Angeles
location.

Pareto of Causes
Reason % effect
Late Supplier 31.3% Causation is the top 5 reasons for late items using the January data (1st level from 9:00 Team Meeting)
Intercompany late 15.0%
Cell over-capacity 18.8%
Supplier Quality 6.3% Click here to insert new row to add additional "Reasons"
Engineering Drawing/Design 6.3%
Remaining % Unassigned 23.0%
Top 5 Action Items
Original Due Current Due
Action Action Description Status Status Description Owner Date Date
Supplier On time performance Improved response On track Quality issues are impacting but Thomas /
overall, there is still improvement Pravin /
Gerhard
SSPS product line transfer Quality and delivery issues of Problem No work done due to softness of Rod 4/30/2003 12/31/2003
UDS-7 vs. PS-7 US sales.

ASV Cell Capacity Cell capacity, Headcount, and Caution Reviews are complete. Quality Vartan / 7/1/2003
efficiency issues are hurting overall view of Rod
labor. Looking at June build rate
Supplier Quality Overall improvement in MRR On track DPM is rising due to excessive Albert 9/1/2003
decrease and Supplier DPM rejections of high quantity receipts.
increase SQE was derailed by ATEX

Engineering Drawings Review PCO for adequate On track Test for electronic PCR system Tony/Rod 7/1/2003
response and Supplier was not completed. Will attempt
Notification trial in June
 Class Exercise - Customer Interview

 Pair up
 Scenario 1 (two minutes)
• Person A (customer) – is interested in a new car
• Person B – find out what Person A values in a new car
 Scenario 2 (two minutes)
• Person B (customer) – is selecting a restaurant to eat at
• Person A – find out what Person B values in a restaurant
 Group discussion
• Any surprises?
• Any difficulties?
 Lean Manufacturing Cycle

SPECIFY
VALUE
1 IDENTIFY THE
VALUE STREAM
2

CONVERT 4
PUSH TO PULL
3
FLOW
Step 5 – CONTINUOUSLY IMPROVE
• Getting value to flow faster exposes hidden muda in the value
stream.
• The harder you pull, more obsticles to flow are revealed so they can
be removed.
Integrating the Lean Enterprise
 Homework Assignment
1. What is considered as value in the eyes of customers.
Why?
2. What are the seven types of waste? Give examples for
each one.
 Read Lean Thinking Chapter 2
 The Value Stream
• Pages 37-49
Questions? Comments?