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Lean Manufacturing

Chapter 5
The Incremental Path

 Joe Day, the president of FNGP (Freudenberg-NOK General

Partnership) of Plymouth, Michigan began to introduce Lean
Thinking in 1992.
 No matter how many times his employees improved a
given activity to make it leaner, they could always find
more ways to remove Muda by eliminating effort, time,
space, and errors.
 When FNGP reorganized its Ligonier, Indiana facility, an initial
Kaizen event to achieved:
• 56% increase in labor productivity
• 13% reduction in factory space needed
 In revisiting this activity in five additional three-day kaizen
events over the next three years, there were:
• 991% productivity boost
• 48% reduction of space needed

Repeat Kaizens – FNGP Ligonier,
Indiana Factory, 1992-1994
Feb April May Nov Jan Jan Aug
1992* 1992 1992 1992 1993 1994 1995

Number of
21 18 15 12 6 3 3

Parts per operator 55 86 112 140 225 450 600

Space utilized
2,300 2,000 1,850 1,662 1,360 1,200 1,200

Kaizen vs. Kaikaku

Radical Improvement Traditional Improvements

Kaikaku can describe radical non- Repeated incremental
recurring improvements or improvement steps
changes “Point Kaizen”or event driven
Sometimes called radical Kaizen improvements
“Kaikaku Teams” often take “Flow Kaizen” incorporates total
control of operations in crisis operations in Lean Manufacturing
situation (TPS)

Example - Kaizen and Kaikaku in Action

What About the Cost?

The Incremental Path

 Improvements as seen in FNGP seem to defy all logic!

 Kaizen activities are not free, and perfection- the complete
elimination of muda – is surely impossible. So…
 Should managers manage the steady state, keeping the
“normal” performance?
 Two common opinions of senior managers from around the
 Steady state management – management of variances
 Planning to do something, asking, “why did FNGP didn’t get the job
done the first time instead of wasting three years before getting it
 Both reactions show how traditional management fails to grasp the
concept of perfection through

Endless steps is the fundamental

principle of lean thinking!
The Radical Path

 The alternative to incremental changes via kaizen events is a

radical change in the path to perfection – kaikaku
 A total value stream Kaikaku involves all the steps from start to
 Read example about glassmaking for the automotive industry
• Chapter 5 pages 91-93

Continuous Radical and Incremental
 To pursue perfection, every organization needs to use both
kaizen and kaikaku.
 Every step in the value stream can be improved in isolation to
good effect.
If you are spending significant amounts of
capital to improve specific activities, you are
usually pursuing perfection the wrong way…
 To effectively pursue both incremental and radical improvement,
two final lean techniques are needed to be used by value
stream managers:
• Apply the four lean principles of: value specification, value
identification, flow, and pull.
• Decide which forms of muda to attack first (type one or type two)

The Picture of Perfection

 Managers have to learn to see:

• See the value stream
• See the flow of value
• See value being pulled by the customer
 The final form of seeing is to bring perfection into clear view so
the objective of improvement is visible and real to the whole
 The example of glassmaking demonstrates a radical rethink of
the whole value stream so that value-creating steps are
conducted immediately next to the customer exactly when
 Toyota certainly had a picture of perfection derived from its
mastery of lean principles:
• Japanese service parts business in 1982
• Same concepts in North America in 1989

The Picture of Perfection

 No picture of perfection can be perfect…

 As changes and improvements are being made to a value
stream, the picture of perfection is changing…
However, the effort to envision the picture of
perfection provides inspiration and direction
essential to making progress along the path…
 One of the most important things to envision is the type of
product designs and operating technologies needed to take the
next steps along the path to excellence.
 The knowledge that products must be manufactured more
flexibly in smaller volumes in continuous flow provides guidance
to technologies in the functions developing generic designs and

Focusing Energy to Banish Muda

 Organizations which never started down the path of continuous

improvement because of lack of vision obviously failed.
 Sadly, other firms set off full of vision, energy, and high hopes,
but make very little progress due to lack of direction and
resources along the path.
 What’s needed instead is to form a vision, select the two or
three most important steps to set you there, and defer to other
steps until later.
 Policy deployment is the last lean technique needed to be done
by top management agreement on:
• Few simple goals for transitioning from mass to lean
• Few projects to achieve these goals
• Designate people and resources for getting the projects done
• Establish numerical improvement targets to be achieved by a given
point in time.

Focusing Energy to Banish Muda

 If a firm adopt a goal of converting the entire organization to

continuous flow with all internal order management by means
of a pull system, the projects required to do this might include:
1. Reorganizing the product families such that product teams take
many on many of the jobs of traditional functions
2. Creating a “lean function” to assemble the expertise to assist the
product teams in the conversion
3. Commencing a systematic set of improvement activities to convert
batches and rework into continuous flow.
 Numerical improvement goals and timeframes may be:
1. Convert into production teams within 6 months
2. Conduct improvement activities on six major activities per month
3. Reduce on hand inventory by 25% in the first year
4. Reduce number of defects by 50% in the first year

Example – Eaton Aerospace Goal Card
Vital Few Goals for 2004
Aerospace Operations Actuation Systems Division Los Angeles Department/Work Group
 Capture New Aftermarket Business of $12.0M Grow the business in targeted areas in support of the  $10M in new business wins
 Establish a Repair/Overhaul Presence in Asia Aerospace overall goals.  Win applicable portions of the 7E7
 Win 7E7 Hydraulics System  Capture new A/M business of $2.3m  Capture new A/M business of $1.5M
 Grow our business 1.5x the Aerospace industry  Win applicable portions of the 7E7  Achieve Sales plan of $99.9m
growth rate  Strategic pricing deployment – take government  Achieve 40% Gross Margin on Government Spares
 Be strategic in our pricing providing high value to spares to 40% GM
our customers  Achieve Sales plan of $192.9m
 Meet acquisition target
Business Excellence and Cost Reduction
 Achieve 95% on-time delivery to customer Drive a culture of Continuous Improvement so that we  Achieve 95% On-Time-Delivery
 Develop an integrated Aerospace Quality System deliver exceptional results for our customers and  Improve Productivity 5%
focus and improve our DPPM by 10% Eaton Aerospace  Achieve $3.5 million in Cost Out
 Improve productivity & efficiency of our operations  Productivity improvement of 4%  Improve Average Repair and PRO TAT to 25 Days
by 5%  Improve Lean Enterprise to 3.0  Achieve DPPM of 3400
 Achieve $30M of cost reductions through strategic  Improve quality performance 10%  Lean Score 3.0
sourcing, lean manufacturing and improved  Strategic Sourcing of $800k  Achieve PROLaunch score 18
Cultural and Organizational Development
 Build organizational capability by completing 100% Drive culture change for Actuation systems so that we  Achieve EHS Score of 3.0
of our “personal development actions” re considered “best in class” within Eaton Aerospace  Improve Employee Engagement Score 10%
 Improve employee engagement by completing and by our Customers  Organization Capability Assessment Actions Complete
100% of our action items from the Employee  Improve Organizational Capability through  Implement APEX to Upgrade Goal Deployment
Satisfaction Survey staffing and execution of OCA and APEX  Develop customer focus metrics
 Make safe work practices, processes and behaviors personal development activities
a focus for 2004 and reduce recordable accidents  Drop TCIR by 20% implementing EHS
by 20%  Improve Employee Engagement scores by 10% if
below Eaton Top 25%
 Voice of Customer data improved by 50%

 Grow revenue from $740M to $777M Meet Profit plan for Actuation Systems, including
 Reduce Working Capital Usage improved profitability and working capital
- DOH from 107 to 93.9 performance.
- DSO from 50 to 47.8  CFROGC to 31%  DOH 119.8
- DPO from 24.3 to 26.7  DOH to 111 days  DSO 49.3
 DSO to 46 days  DPO 28.6
 DPO to 31 days  Operating Margin 11.4%
 OP Margin to 14.3%  CFROGC 20.3%
Smashing Inertia to Get Started

 We now reviewed the basic lean principles, the five powerful

ideas in the lean tool kit needed to convert firms and value
streams from areas full of MUDA to fast-flowing value, defined
and then pulled by the customer.
 The techniques themselves and the philosophy are open for
everyone to know.
 Transparency in everything is a key principle.
 Policy deployment operates as an open process to align people
and resources with improvement tasks.
 Massive and continuing amounts of problem solving are
conducted by teams of employees who historically have not
even talked to each other, much less treated each other as
 Yet the catalytic force moving firms from batch-and-queue into
value streams is generally an outsider – the change agent.

Homework Assignment
 Questions:
1. Describe the five steps of Lean Thinking. How are they
being deployed to achieve continuous improvement?
2. You are documenting a Current State Value Stream Map for
a business for the first time
• Which types of waste are likely to be present?
• Which will be the top three types of waste that you are likely
to be first address? Explain your selection
 Read Learning to See Parts I, II and III
• Start to Page 1-56

 Describe the five steps of Lean Thinking. How are they being
deployed to achieve continuous improvement?
 You are evaluating a Current State Value Stream Map that was
done for the first time.
• Which types of waste are likely to be present?
• Rank the top three types of waste that are likely to be first to be
addressed and which would be last, and explain why you think
they will be in that order.

Questions? Comments?