Lean Six Sigma Academy

I have the honor of hosting the 46th edition of the management improvement carnival.  So without further delay here are some of my favorite articles from the past few weeks.

• Kevin Meyer, of Evolving Excellence fame, recently traveled to Japan and was kind enough to write up some amazing summaries of what he saw and experienced.  The company tour reports are here: Toyota, Saishunkan, TOTO, and an electronics company.
• My friend, Mark Graban, broke one of his personal blogging rules and wrote while he was mad.  You can check it out by reading This WSJ Article (as do Many Organizations) Misses the Point of 5S.
• I’m never quite sure how he gets these ideas… but Jon Miller managed to tie leadership and mountain goats together in 7 Leadership Lessons from a Mountain Goat.  Great stuff!
• John Hunter offered up some interesting data showing that the US is still doing OK when it comes to manufacturing in Global Manufacturing Data 2007.
• A blog I’ve recently started to follow and quite enjoy is The Lean Thinker.  Be sure to check out A3 by PowerPoint for an example of what I mean.
• If you are interested in being more productive I have a must read article for you, and I really mean it’s a must read.  So be sure to check out The Ultimate Productivity Toolbox for Creative People.
• Finally, I leave you with one of the best marketing minds on the blogosphere as Seth Godin tells us about Reacting, Responding & Initiating.

Here’s the situation… the cycle time to produce one unit in our widget making factory is 300 seconds and the takt time for this product is 50 seconds per piece. In other words, in order to satisfy customer demand we need to produce a finish unit every 50 seconds.

How Many People?

OK, this is straight forward enough… but the next question is how many people do we need in the cell? One of the team members remembers hearing about some formula that looked at the ratio of cycle time to takt time to come up with the, so-called, optimal crew size.

Well, by taking 300 seconds (cycle time to produce one part) over 50 seconds (takt time) the team figured they needed 6 people in the cell. Is this correct?

Not So Fast

Well, as Lee Corso often says… “Not so fast my friends.” You see in order to accurately determine the optimal crew size the team needs a little more information.

Instead of stating the cycle time is 300 seconds, the team must first understand how much of that 300 seconds is “manual” cycle time – or the time an operator is actually needed – and how much is “automatic” cycle time – or the time the operator is technically not needed (such as when they hit the start button and commence reading their newspaper).

The Real Calculation

Now then… back to our widget factory. After some quick time studies the team learned that the manual cycle time is 100 seconds and the automatic cycle time is 200 seconds.

So, when they divided the sum of the manual cycle time – 100 seconds – by the takt time – 50 seconds – the optimal crew size came to 2 people (instead of 6 when the total cycle time was used).

Moral of the Story

So, the moral of the story is to calculate the optimal crew size of a work area by dividing the sum of manual cycle time by takt time. Of course, at this point the fun has just begun as the team must now determine what those 2 people will actually do! But let’s save that for another discussion.

Is this how you calculate optimal crew size in your organization?

Walmart is in the news with their new logo.  Something that isn’t getting as much press is a new thing Walmart is also beginning to do in their stores… turn off the lights.

Where are the waffles?

I was recently in my local Super Walmart wondering why the whole frozen food aisle was dark.  Then as I walked down the aisle to find the frozen waffles (my kids love them) the lights starting coming on in each freezer as I approached them.

It seems Walmart is making an effort to conserve energy and I applaud them for it.  We bloggers are quick to pummel companies like Wally World for their supply chain antics… but when they do something good I think we should recognize them for it.

The Green Japan

During my recent trip to Japan with Gemba Research one of the things I noticed was how energy focused all the companies we visited were.

At Toyota, for example, when the workers went on break they turned off the lights in their area.  Such a small thing likely provides huge overhead savings for Toyota and more significantly the environment.

What about you?

What about you or your company?  Do you turn the lights off when people aren’t around?  What other “green” things do you try to do in order to make our world a better place?

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Allow me to introduce Joe, the plant Industrial Engineer. Joe is a nice boy fresh out of college.

On this particular day old Joe comes popping out of his cubicle in his Dockers and white polo shirt holding a clip board and stop watch.

Joe then rolls out to the shop floor and spots his victim – a young lady about 22 years old named Sherry.

Sherry is a nice girl trying to do the best she can. She received a whopping 20 minutes training and was set on her way assembling product.

Blood Pressure Rises

The next thing poor Sherry knows old Joe is in front of her fondling his stop watch. He explains he is collecting data for a value stream mapping exercise.

Sherry has no clue what value stream mapping is and can’t take her eyes and mind off Joe’s stop watch. She’s also getting a little freaked out the way he keeps fondling it and smiling (his stop watch).

Joe goes on to explain, “Just work as if I’m not here. I am not timing you… I am timing the process.” Sherry isn’t buying it. She is a shy girl and is now so nervous her hands won’t stop shaking. Sherry is in great shape but begins a nervous sweat down the small of her back.

The next thing she knows Joe yells “START!” She does her best to assemble the product. Once she completes it Joe slams his finger down on the stop watch and quickly writes something down on his piece of paper.

This cycle goes on for what seems like eternity. While Sherry eventually settles down she never performs her job as well as she can. She is just too nervous and anxious.

Thanks, Sherry

Finally, Joe collects all the data he needs. He quickly thanks Sherry and rolls back into the land of cubicles. Sherry still has no clue what the data is for and wonders if she did good or bad?

Nonetheless, Sherry breathes and sigh of relief and quickly settles right back into her normal groove (if only he could time me now, she thinks).

While I may be over dramatizing this (maybe not) I’ve been Joe before. Well… I never fondled my stop watch!  But I’ve stood in front of many people with stop watch and clip board in hand.  And I’m sure I’ve been the cause of lots of high blood pressure along the way.

The Alternative

Then I learned a trick.

Instead of pummeling people with a stop watch I simply went out and over explained what I was doing and why I needed to collect some cycle times.

Then, with their permission, and their manager’s permission, I set up a video camera and let it roll for a few hours. I explained that I didn’t want to make them nervous standing over them with a stop watch and that I’d like their help collecting the data once the video taping was done.

Sure, people are still a little nervous for the first few minutes. But after 10 minutes or so they normally forget all about the camera and begin to work normally.

Involve them

Once we have all the footage we need I ask them to watch it with me. We collect cycle times (turning the little timer on makes this a breeze) and also talk about how we could improve the process. Most operators really appreciate this once they realize you are there to help them do their job better.

And once you get the operator’s to this point the battle is nearly won. Not only will they let you tape them again and again they will start to think as they work. They’ll think about their every move and how they could possibly do things better.

And while thinking is really good… the best part of this new process is people like Joe will stop freaking people out with all their freaky stop watch fondling.

What about you? Have you had any luck using video cameras? What about stop watches? No fondling I trust?

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I have a question for you. How would you staff a cell that produces multiple products, all with varying cycle times?

In this article I will offer my thoughts and am excited to hear your comments as to how you would (or do) approach it in your organization.

And while I will be taking a manufacturing stance in this example, this topic definitely applies to other areas as well (e.g. the office).

Cycle Time Assumptions

Let’s assume, hypothetically speaking, we have developed a u-shaped cell were material flows counter-clockwise.

Let’s also assume, for the sake of this example, there are 5 similarly sized products produced in the cell.

The total manual cycle times (e.g. the time operators are needed) to produce each product are as follows.

- Product A: 5.1 minutes
- Product B: 6.8 minutes
- Product C: 4.9 minutes
- Product D: 7.9 minutes
- Product E: 3.9 minutes

We’ll also assume there is no auto or machine time required to assemble these units. Therefore, the average cycle time for the 5 products is 5.72 minutes.

Demand and Takt Time Assumptions

Now then, let’s also assume that on this particular day our “make to order” model cell is asked to produce the following.

- Product A: 23 units
- Product B: 26 units
- Product C: 3 units
- Product D: 94 units
- Product E: 14 units

In total, the cell must produce 160 similarly sized units. Assuming 8 net working hours (480 minutes) are available in the day our takt time comes to 3 minutes per unit (480 minutes / 160 units).

For the sake of this example, we will also assume no changeovers are required as we switch between products.

Calculating the Crew Size

Let’s get to the million dollar question. How should the team determine the optimal crew size for this particular day?

We know that the formula for optimal crew size is the sum of manual cycle time / takt time.

However, since we are not producing one product (like most of the lean books present us with) it’s not quite as straight forward.

If they use the average cycle time for the units our optimal crew size comes to 1.91 operators, which they round to 2 (5.72 minutes / 3 minute takt). Using this approach the team would staff the cell with 2 people, splitting the work up evenly.

Would this work out? I vote no.

Weighted Average Cycle Time

Since the team is not working with an even number of units averaging is the wrong thing to do, in my opinion. Asking these two people to succeed (without overtime) is the perfect example of muri.

Instead of taking the average, the team would be better served by taking a “weighted average” of the cycle times. This is easy to do in Excel using the “SUMPRODUCT” command. Here is how this particular example is being worked out in MS Excel.

When we take the weighted average, which accounts for the fact the team is asked to produce far more product D’s than anything else, we learn the weighted average cycle time is 6.91 minutes.

Weighted Average Crew Size

If we use the weighted average cycle time in the formula our optimal crew size comes to 2.3 people (6.91 minutes / 3 minutes takt).

This is to say that more than 2 people are needed in the cell on this particular day. Or, at a minimum, more than 2 people will be needed for parts of the day.

So, management should not expect 2 people to get the job done in the available time until some waste is eliminated and we are able to reduce the total cycle times.

What do you think?

What do you think? Do you (or would you) handle similar situations the same way? Or do you (or would you) approach it differently?

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Ah yes, efficiency. If there was ever a word more abused I’d like to know about it. I don’t think there is. OK, maybe utilization. But efficiency is really butchered. So let’s dig into the efficiency conundrum a bit this evening.

Efficiency

There are many formal definitions for efficiency. Just Google it if you don’t believe me. Here is how I like to explain it.

We are truly efficient when meeting the exact requirements of our customer while using the minimum amount of resources.

Apparent Efficiency

Next we come to what Taiichi Ohno called apparent efficiency.

Imagine an assembly line with 10 workers is able to produce 100 units per day. After some good old fashioned kaizen the team of 10 lads increases the daily output to 120 units per day. This is great, right? I mean they increased efficiency by 20%.

Mr. Ohno went on to explain that this is only a good thing if the customer is willing to buy this extra 20%. If they are not willing to buy the extra units all we have done is create the waste of overproduction. It’s nothing more than apparent efficiency.

True Efficiency

In this example, assuming the customer wants to keep buying 100 units per day, the only way to increase the true efficiency of the system is to figure out how to produce these 100 units with less than 10 people, or perhaps with less material (e.g. WIP).

Let’s assume the team is able to kaizen 2 people off the line. These folks can then be moved to another area that has to use overtime in order to meet customer demand.

Or perhaps you take the 2 strongest people from the line and form a RIG team (rapid improvement group) allowing them to go to another area to kick start some kaizen there.

Summary

So anytime we speak about efficiency we must be careful to not mistake true efficiency with apparent efficiency. One is naughty and one is nice. Let’s all do our best to not be naughty, OK?

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I am finally winding down on one serious road trip across the UK and Germany.  I head back home tomorrow.  I have slept in 6 different hotels the past 9 evenings.  It’s been crazy to say the least… especially given the fact we also launched the new website design during this same time!  For the record, I don’t recommend this strategy to anyone. 

I am looking forward to getting back on the saddle and writing more consistently, including finishing up our value stream mapping series.

Until then I wanted to share an interesting article I discovered over on Mark Graban’s blog.  The article discussed how James Press, former top Toyota exec now Chrysler boss, is beginning to make some changes.

At meetings with Chrysler’s dealers this week, Press revealed the beginnings of a plan to overhaul the troubled automaker’s lineup, trimming its 28 existing models to something in the neighborhood of 16 and adding new ones to fill existing gaps.

I really applaud Press for this. Mark questioned why it took a former Toyota man to figure this out. And it’s a fair question. But I think this type of problem (overlapping product lines) exists within many companies and may be one of the least appreciated strengths of Toyota.

I am especially impressed to see how Press is willing to sacrifice short term profits as they trim their product line.

“They will lose sales,” says John Wolkonowicz of Global Insight’s North American Auto Forecasting Group. “When they get rid of one model, they may only get back 20% of those buyers with their remaining cars.

Let’s see how this unfolds. Initially, I was not sure how to feel when hearing of Press leaving Toyota for the big bucks of Chysler. But I must confess… I’m pulling for him now. I really hope to see Chrysler turn things around. Time will tell.

Speak to you again soon back in the awesome USA! 

One of the most poweful operational metrics I know of is Rolled Throughput Yield (RTY).  It’s used to assess the “true” yield of a given process.  This includes what we often call the “hidden factory” that plagues so many organizations… sucking profit right off their financial statements!

Traditional Yield

Let’s use an example to demonstrate how some, let’s call them, traditional manufacturing folks attempt to measure things. 

Say there is a manufacturing process with 3 steps - Processes 1, 2, and 3 (original, eh?).  Let’s also say that on a particular day they note the following performance:

• Process 1: 100 parts passed through this process and 84 “good” parts left this process (scrapped 16).
• Process 2: With some WIP laying around 110 parts passed through this process with 82 “good” parts passing (28 scrapped)
• Process 3: With even more WIP laying around this process they managed to produce 138 parts with 126 parts passing (12 scrapped).

Since the manufacturing manager only cares about “what goes out the door” the process they are most concerned with is the last one - process 3.  And since they had a great day (only scrapped 12 parts) they report a “yield” of 91% (126/138).  The manager even calls his buddy Sal, the sales manager, to brag about all the product they shipped!

Not So Fast Buddy

There are some fundamental flaws with this technique.  The most severe issue is the fact they are ignoring all the scrapped parts process 1 and 2 created.  This “hidden factory” is not known by Sal or really anyone else short of the folks on the line.

Here is how the manufacturing manager should be measuring the performance of their line.

RTY

Process 1 had a daily yield of 84% (84/100) while process 2 had a daily yield of 75% (82/110) and finally process 3 had a daily yield of 91% (126/138).

So, to calculate RTY we simply multiply these yields together giving us a composite yield for the day.  Doing this gives us:

• 84% x 75% x 91% = 57%

Our Opportunity

This value of 57% is a more accurate representative of how this production line is performing.  And more importantly this 57% is our opportunity as lean and six sigma practitioners!

Sure, the manager will probably not call old Sal telling him the latest RTY.  And that’s fine.  But we must not kid ourselves into believing we are performing better than we are.  By focusing on RTY we can be sure we stay focused on the true pulse of the organization.

Note: All the WIP I mentioned in the example is another problem!  But we will save that for another day. 

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The business metric RONA (Return on Net Assets) is used by many companies in order to gauge how well they turn their assets into income.

I am no accountant but do know there are a few ways to calculate RONA.  For the sake of this article let us work with the simple formula: RONA = (Sales – Expenses) / Net Assets.

RONA Puts Inventory in it’s Place

The reason I personally like RONA is I believe it places the correct emphasis on inventory. If we decrease inventory (an asset according to cost accounting) and sales and expenses stay flat we improve RONA.

If we are able to actually increase sales, reduce expenses, and reduce inventory good golly Ms. Molly RONA is on her way up! 

Some Practical Ways to Increase RONA

So, what are some ways a lean and six sigma practitioner can work to improve RONA? Here are some ideas but I would love to hear yours too.

1. Reduce defects - both on the shop floor and front office using six sigma and things like poka-yoke and the often forgotten pillar of the Toyota Production System jidoka (Reduces Expenses).
2. Increase throughput by using tools like Value Stream Mapping with extra emphasis on flow. This assumes, of course, the market is not a constraint (Increases Sales and Reduces Assets as inventory turns increase).
3. Implement pull systems ensuring we only produce what the customer wants when they want it which lowers inventory (Reduces Assets).
4. Implement TPM ensuring machines are available when we need them to be (Increases Sales).
5. While on the TPM journey ensure OEE is being tracked and improved (Increases Sales).
6. Become obsessed with kaizen (Reduces both Expenses and Assets and can also Increase Sales).

Is your company focused on improving RONA? If so, please share how you go about improving it.

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Today I read an article over on Industry Week that troubled me for much of the day.  Most of us have heard of all the recent issues coming out of China related to quality and safety.  One of the major stories was related to the paint used on Mattel toys. 

Many folks in the West use these stories to prove that outsourcing is not always the best way to go.  Heck I have even made this comment myself from time to time.  But the Industry Week story was not related to outsourcing.  Instead it was all about suicide.

Zhang Shuhong, who ran the Lee Der Industrial, killed himself at a warehouse on Saturday; days after China announced it had temporarily banned exports by the company, the Southern Metropolis Daily said, as reported by cnn.com.

The fact this man, possibly a husband and father, took his life is troubling enough. But there is more.

CNN reported that the Chinese newspaper said that a supplier, Zhang’s best friend, sold Lee Der fake paint that was used in the toys. “The boss and the company were harmed by the paint supplier, the closest friend of our boss,” a manager surnamed Liu was quoted as saying.

So this man was apparently betrayed by his best friend. Who knows if this is true and many will probably get their darts ready saying how it is probably all lies.

Not me. It makes me very sad to think of this man’s friends and family. I’ll be praying for them and ask anyone who practices any type of faith to do the same. You see, some things (like human life) trump any discussion of lean or six sigma.