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Breakaway LeanTM - 50/50/20 in Six Months

by Chad Kymal, CTO - Omnex

Omnex's Lean approach is a highly structured results oriented process that guarantees results in the relatively short time frame of six months. What does 50/50/20 mean? It means that an organization practicing Breakaway LeanTM can achieve a 50% reduction in inventory, a 50% increase in throughput and a 20% reduction in operational cost in six months.

The Breakaway LeanTM Process

Month 1

The Lean process starts with an assessment that is made up of three parts - Culture, Tools and Lean Scorecard. A Lean process has to work on all three of these dimensions: the lean culture has to be in place, the organization has to learn the lean tools, and an initial scorecard has to be taken to understand the opportunities for improvement. The most important of these three dimensions is the need for the correct culture: the lean vision, the roadmap, top managements' commitment, tie into the organizational goals and budgets, appraisal process and the communication to the workforce.

Based on the assessment, the organization working with Omnex will create a Lean Roadmap. In conjunction with other improvements and opportunities, the Roadmap is usually takes the form of a Business Excellence Roadmap.

The assessment will also identify all the value streams and in particular the initial one or two to work on. In the first month, we see the creation of the Lean Organizational Structure (see figure 1).

Figure 1: Lean Organizational Structure

Lean Organizational Structure

The Lean Facilitators are corporate champions, members of top management that own the value stream, and Omnex lean experts. Lean team leaders direct the project, while the project team is a cross-functional group working in the value stream and support streams.

Month 1 the Executive Management, Lean Champions and Project Team Leader train. The project charter and the project ROI are completed as well. Month 1 also has top management communicating the Lean Roadmap and Vision to the organization.

Month 2

Value Stream Map Workshop and Preparation for Continuous Flow

During Month 2, the Lean facilitators, project team leaders and project teams participate in the value stream workshop. This five-day workshop develops the present state and future state maps. On the fifth day, the future state map with its benefits will be presented to top management.

The plant will now prepare for the next workshop, when the value stream will be laid out in a Continuous Flow Cell or Line. Inventory will be created to avoid disruption of customer delivery. Customer change notifications (especially important to the automotive industry) will be communicated. Key machines will be studied for their CP, CPk or PP and PPk as a benchmark to be studied against after the move. Production Part Approval Process (PPAP) documentation will be discussed with automotive customers at this point. However, process/product validations after the process is rearranged are a must regardless of industry.

An action plan for improvement of key impediments to the continuous flow will be documented with specific actions. In some cases, equipment, handling or tooling may have to be purchased. In other cases, quality problems or set up reduction may need to be done first.

Month 3 or Month 5- Continuous Flow Workshop and Standardized Work The continuous flow workshop starts with the revalidation of the future map and Cell Layout. The new layout is implemented. Production parts are made on the line, and the line is studied to see if it has indeed been optimized. (Note: all product made on the line on Day 3 needs to be 100% inspected. In other words the line should be in containment.) Is the line balanced? Is there waste in the current layout? Do machines need to be moved again? Does work need to be redistributed?

The flow is then optimized with a second analysis by the third day of the Continuous Flow Gemba. Machines are rearranged and work redistributed to achieve optimization on the third or fourth day if necessary. Pull systems for making exactly what is required by the customer will be introduced in the value stream. Finally, on the last two days of work this pull will be standardized with the documentation of the cell characteristics.

Standardized work is made up of a standardized work chart, job analysis sheets, production capacity sheet, work balance chart, standardized work combination table, and standardized worksheet. In other words, the standardized work will very clearly indicate exactly how the value stream should operate. Any future changes or improvements will have to be indicated on the same standardized work forms.

Before the line can go into full production, the process and product validation takes place to reduce the risk to the organization and the customer of manufacturing poor quality product.

Month 3,4, or 5

The future state map introduced in Month 2 would have identified the need for quality improvements, SMED, or maintenance improvement. Certain events take precedence on the path to continuous flow. See chart below.

Chart: Road to Breakaway LeanTM

The theoretical one piece flow (i.e. running lot sizes of one) is derived when a value stream has zero defects, downtime or setup. Of course, the ideal situation is only theoretical. In real life, Lean tries to get as close as it can to it. If there are severe defects, downtime, or set up issues, then it will not be practical to move toward a Lean continuous flow without first solving the manufacturing issues at hand.

Achieving Zero Defects

Omnex uses four different methodologies to achieve zero defects. We use the methodology and approach that works best with the issues in the value stream.

Based on an analysis of customer, warranty, and internal rejects the methodology is chosen as follows:

a. Large Customer or Internal Issue - (over $150,000)- If the analysis shows that one or more defect types are prevalent in all the processes or prevalent in one product, then Disciplined Problem Solving or the DMAIC methodology can be used. The key question is how much is saved by solving the problems with the product and do we think we can get to the root cause by brainstorming.

b. Sporadic Problems on one line - If lack of manufacturing process control is seen, Omnex typically uses a process called Process Review which involves using shop floor cross functional teams to do Process Standardization using Process Flow, PFMEA, and Control Plans. See Figure 2.

Figure 2: Process Review Method

c. As a rule, if the organization has not done process review as a shop floor exercise, it will not include layered process audits. Then, after the controls are well defined and there are good shop floor standards, the layered process audits can be implemented.

d. The fourth methodology takes low or high PPM items and uses mistake proofing on them. Omnex implements mistake proofing by itself or in conjunction with Process Review.

Zero Setup Time

SMED - Setup reduction is an important Breakaway LeanTM workshop. Long set up times usually require larger lot sizes. The key to smaller lot sizes and reduced down time is to have setups that are inconsiderable. SMED works to make "inside" setup time "outside" set up time, as described by Shiego Shingo in his famous book, The Study of the Toyota Production System from an Engineering Viewpoint. This exercise will need to be completed before the continuous flow workshop.

Zero Down Time

The inclination would be to implement Total Productive Maintenance (TPM). However, TPM is its own methodology and philosophy on par with Lean or Six Sigma. Before the Continuous Flow workshop, the Lean team can study the downtime history and take corrective action to fix recurring failures. In some cases, machines may need to be refurbished. After the corrective action is completed, both operator preventive maintenance (daily/weekly/simple) and Maintenance department (weekly/ monthly/quarterly) checklists should be created and followed.

Zero defects, downtime, or setup times are not essential to proceed to Continuous Flow, however, Omnex doesn’t want any obvious bottlenecks that restrict flow in terms of quality, downtime or changeover issues.

Month 6

5 S Workshops

The Omnex Breakaway LeanTM methodology suggests two different implementation strategies for 5S. One strategy is to implement it in parallel with the value stream mapping and continuous flow workshops. 5S provides the visual indication of a change in process. On the other hand, it can also be implemented in the end of the continuous flow exercise during Month 6.

Breakaway LeanTM

The key to the Breakaway LeanTM methodology is the structured methodology of lean events that allows for immediate action. In a time of cost improvement, Breakaway L eanTM promises changes in six months with a known structured roadmap. See figure 3.

Figure 3: Lean Roadmap

If you implemented Lean one or two years ago it may be a good idea to revitalize it. Over time, processes change, customer pull changes, and new operators and supervisors come in. It is possible to still meet the goals of 50/50/20 in a factory that already implemented Lean a few years ago.

Implementing Breakaway LeanTM in a $50 Million factory that has four value streams of equal value (i.e. $12.5 Million with 3 weeks of inventory on average that has 35% material costs) could provide savings of $120,000 in inventory savings and $2.3 Million in operating cost savings. If the gained capacity in the lines cannot be used, then conservatively we would only budget 20% of the operating costs (i.e. $1.4 Million).

Savings Scenario
Revenue of Line - $12.5 Million
Cost of Sales - $11.275 Million - material and operational cost
Inventory on Hand - 3 weeks - value approx $600,000
Operating Costs - $6.9 Million

Productivity Improvement - 50% will create a savings of $2.3 Million for the same volume
Inventory savings with Holding Costs of 40% - $120,000
Minimum savings of 20% Operating Costs - approx. $1.4 Million