A Lean Story
TRI-STATE MANUFACTURERS’ ALLIANCE
A program of The Chamber of Commerce of Southwest Indiana
with
Jean Cunningham
Building LEAN Beyond Manufacturing
• JCC founder and president
• Lean Accounting, Lean Business
Management, Lean Office pioneer
• Original Thought Leader for Lean Accounting, Lean IT, Lean HR Summits
• Lean accounting lecturer for The Ohio State University, Masters of
Business Operations Excellence program
• Lean Education Advancement Foundation board member
• Former CFO


Lantech, Inc.
Marshfield Door Systems
© 2016 by Jean Cunningham Consulting
All rights reserved


Association of Manufacturing Excellence
Stiles Associates
2
Managing Times Press, 2003
Shingo Prize, 2004
© 2016 by Jean Cunningham Consulting
All rights reserved
Lean Accounting
Lean IT
Lean Accounting
Building LEAN Beyond Manufacturing
Productivity Press, 2007
Shingo Prize, 2008
Wiley Publishing, 2008
3
Industry Leaders
© 2016 by Jean Cunningham Consulting
All rights reserved
4
Lantech Lean Buzz
© 2016 by Jean Cunningham Consulting
All rights reserved
5
Lantech Metrics
Batch and Queue
Flow
Development of new product family
3-4 yrs
1 year
Working prototype
3 months
1 week
Batch size
10-25
1
Production throughput time
16 weeks
14 hrs to 5 days
Employee hrs per machine
160
80
Delivered defects per machine
8
0.6
Product delivery lead time
4-20 wks
1-4 wks
Order entry to schedule
12-14 days
2 days
From “Lean Thinking”, Jones and Womack
© 2016 by Jean Cunningham Consulting
All rights reserved
6
Lantech Metrics
Before
After
WIP and FG inventory
$2.6 M
$1.9 M
Excess space
0%
30%
Employees
300
300
Volume
100%
200%
Market share
38%
50%
Profits
Loss
Industry Leading
From “Lean Thinking”, Jones and Womack
© 2016 by Jean Cunningham Consulting
All rights reserved
7
My First Lean Aha Moment
Assembly
Welding
Cutting
P
A
I
N
T
Inv
Weld
Cut
Assy
P
A
I
N
T
Assy Assy
Assembly
© 2016 by Jean Cunningham Consulting
All rights reserved
8
“Fix the Office”
• All about the processes throughout Lantech
• No system changes…..yet.
• Creating flow
• Once and be done
Factory
Materials
Order Prep
Product
Development
Engineering
Accounting
HR
IT
© 2016 by Jean Cunningham Consulting
All rights reserved
9
Financial Value
• Expenses at ½ of Growth Rate
• Shipments per Person
• Working Capital as % of Sales
• Profit Model
Profit
Loss
$
© 2016 by Jean Cunningham Consulting
All rights reserved
Accelerated
Profit
Break-even
Volume
10
“The problem is the perception that when you get your monthly report, you
now know the vital issues in the business. … I would say even more strongly
from my experience that you don’t know the details of the business based
upon accounting … it’s based on two big sins—standard costing and
material resource planning (MRP). … I don’t want to say it too strongly, but I
really think that if you drive your ship … based on the two instruments of
standard cost and MRP, you will pretty much drive yourself into a waste
condition that is almost unimaginable.”
— Pat Lancaster, CEO, Lantech
Lantech doubled the size of the company
with the same number of employees
Quote excerpt taken from The Lean CEO by Jacob Stoller
© 2016 by Jean Cunningham Consulting
All rights reserved
11
People Value
• Everyone involved
- No one will lose there employment due to productivity gains
- Everyone’s job has to change
• Move people around
• Not everyone makes it
- Some at all levels leave by their own choice
- Hierarchical leaders must change or leave
© 2016 by Jean Cunningham Consulting
All rights reserved
12
“A leader is like a shepherd. He stays behind the flock,
letting the most nimble go out ahead, whereupon the
others follow, not realizing that all along they are being
directed from behind.”
Nelson Mandela
As quoted by Linda A. Hill
Harvard Business Review
January 2008
© 2016 by Jean Cunningham Consulting
All rights reserved
13
Order Flow
Simulation
Order Flow
Materials
Inside
Sales
Design
© 2016 by Jean Cunningham Consulting
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Schedule
Quality
15
One Piece Pull Work Cell
• Sit close together
• Sit in order
• Only 1 at each operation
• Pass only when the next person is ready
© 2016 by Jean Cunningham Consulting
All rights reserved
16
Lean Metrics
Lead Time, Cycle Time, Takt Time, Perfect Manning
© 2016 by Jean Cunningham Consulting
All rights reserved
17
Product Cycle Time
Order Type
Cycle Time in Minutes
% of Total Sales Design Schedule Materials Quality Total
Hot
Regular 1
Regular 2
Normal
Maximum
Weighted Avg.
© 2016 by Jean Cunningham Consulting
All rights reserved
13% 0.25
33%
1
20%
1
33% 0.5
1
0.5
0.5
0
1
0.5
0.5
1
0.25
1
1
1
0.25
0.5
0.25
0.5
1
0.73
1
0.40
1
0.73
1
0.90
0.5 4.5
0.42 3.18
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Cycle Time in Minutes
1.2
1
0.8
0.6
0.4
0.2
0
Sales
Design
Schedule
Maximum
© 2016 by Jean Cunningham Consulting
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Materials
Quality
Weighted Avg.
19
Takt Time
How often do we need to complete an order?
• Meet the rate of customer demand = “Takt Time”
available time
Takt =
demand units
• Current: Need 400 orders in one day
Available # minutes in day = 450
Demand = 400
Takt = 1.125 min
• Future: Need 400 x 110% = 440 orders in one day
Available # minutes in day = 450
Demand = 440
© 2016 by Jean Cunningham Consulting
All rights reserved
Takt = 1.02 min
20
Takt Time / Cycle Time
1.2
Current Takt
FutureTakt
1
0.8
0.6
0.4
0.2
0
Sales
Design
Schedule
Maximum
© 2016 by Jean Cunningham Consulting
All rights reserved
Materials
Quality
Weighted Avg.
21
Perfect Manning
Current People = 9
(4 operators, 4
movers, 1 checking)
∑ CT
4.5
Maximum
=
= 4.00 people
TT
1.125
Average
Future
How much work
needs to be
eliminated to stay
under 3 people?
© 2016 by Jean Cunningham Consulting
All rights reserved
∑ CT
3.18
=
= 2.83 people
TT
1.125
∑ CT
TT
=
3.18
1.02
= 3.11 people
∑ CT
?
=
= 2.99 people
TT
1.02
2.99 x 1.02 = 3.05 CT
3.18 − 3.05 = 0.14 minutes
22
Lead Time
W
S
a
l
e
s
W M W
.25-1
1
D
e
s
i
g
n
W M W
0-1
.5 .5 .1
S
c
h
e
d
u
l
e
M W
.5-1
.5 .5 .1
M
a
t
e
r
i
a
l
s
W M W
Q
u
a
l
i
t
y
M M
.5 .5 .1
.5-?
.5 .5
.25-1
.5 .5
Value Add = 1 to 4 minutes
Non-Value Add = 6.8 minutes minimum
Total = 7.8 to 10.8 minutes or more
© 2016 by Jean Cunningham Consulting
All rights reserved
23
Metrics
No. of People
Lead Time
No. of Units
Units in Inventory
Flexibility
Ability to Predict
Completion Time
© 2016 by Jean Cunningham Consulting
All rights reserved
Current
9
11 min
400/day
10-15
Low
Future
3
4 min
440/day
3
High
Low
High
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Box Score Tracking
CURRENT
GOAL
9
3
Lead Time
11 min
4 min
No. of Units
400/day
440/day
10-15
3
9
3
No. of People
Units in Inventory
No. of People
© 2016 by Jean Cunningham Consulting
All rights reserved
J
F M A M
J
J
A
S
O N D
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A Lean Story
TRI-STATE MANUFACTURERS’ ALLIANCE
A program of The Chamber of Commerce of Southwest Indiana
Material is Copyrighted