My trip to Atlanta in August took me through Franklin, Ky., so I decided to stop for a short visit with the vice president of a company that started its lean journey three years ago. This company has been cited in previous articles, but for those readers who may not be familiar with their history, they are a Japanese owned auto parts supplier that had been in the United States for about seven years before the VP contacted me to conduct an assessment and launch the subsequent lean transformation project. During the initial 84 months of their start-up here, the company had made a profit only one month. Within two months of launching the lean initiative the company turned a profit and has been profitable ever since. Their transformation was extraordinary, but they had extraordinary leadership and an extraordinary staff who enthusiastically embraced lean.
Ron, the vice president, proudly reported that they continue to make significant strides in throughput, work-in-process reduction, and connecting internal customers and suppliers to create flow. At the start of their journey, the staff was working an average of 60 hours a week. On-time delivery was achieved only through an excessive amount of work-in-process, a large finished goods inventory, and a lot of overtime. The factory operated 24/6 so growth opportunities were limited. Ron told me the plant is now producing the same volume on two 40-hour shifts, and work-in-process is less than half of what it was three years ago.
Getting WIP under control
I preempted this article with that update because I want to focus on work-in-process (WIP). Getting WIP under control reduces chaos in the plant, and frees up financial resources so they can be used for growth opportunities. Another plus through WIP reduction is better space utilization for current operations. Freeing space of unnecessary work-in-process allows internal customers and suppliers to become closely connected thus creating smooth, continuous flow. Smooth, continuous flow reduces lead-time, enhances quality, reduces operating cost, and improves cash flow, which are all objectives that managers and business owners in every industry are striving to achieve.
The accompanying pictures illustrate a common issue that the staff deals with when processes are congested with excess work-in-process. Note how the assembly person has to maneuver the tall cabinet around partially completed units until he can find a temporary location for the tall cabinet to wait in line for the next process. All of the maneuvering takes time and consumes valuable resources (people, space, time, personal energy) that could better be utilized completing units that can immediately be delivered to the consumer. Moving product around stacks of other product waiting in queue increases the risk of damage or loss. Believe it or not, excess WIP can swallow up unsuspecting product and send it into a black hole never to be found until after it has already been produced again. I suspect that some of the items on your company’s proverbial hot list are victims of the black hole theory.
Observing and learning
How can you tell when a process is accumulating too much WIP? The best method is by simply going to gemba to observe and absorb how all of the processes are interacting. gemba is a Japanese word meaning, “where the work gets done.” Go to the production floor, find a spot where you can observe internal customer/supplier relationships, and watch and absorb. Note the frequency of incoming work versus outgoing. Also note how incoming work is arranged among the existing pieces or loads. Is work accumulating faster than it is being flushed through a process?
Is new work being placed in front of existing work causing the internal customer to have to move unnecessary loads in order to get the work that should be processed next? If work is processed using the last-in-first-out method, older work will continue to age and ultimately wind up on the hot list, which creates more chaos and confusion as people search through unnecessary stuff to find the required parts.
When you are in gemba, pay attention to the material movements that take place between internal customers and suppliers. Every time a product is moved without any value-adding process taking place, that is waste. The more material movement, the more waste. Ridding processes of waste is the fundamental reason why most companies embark on the Lean journey so it stands to reason that if you reduce WIP you will reduce waste, increase product velocity, and ultimately increase profit.
Apply 5S to WIP
How can you decrease WIP and create flow? It has been my experience that the best way to get started is to apply Extreme 5S thinking to WIP by:
•Sort the existing WIP. Separate the product by priority of completion date or promised date to the customer. Remove product that is no longer required due to cancelled or changed orders.
•Set-in-Order the remaining WIP. Organize the product by completion date or promised date to the customer so first-in-first-out (FIFO) processing will be possible for all future product. Designate locations for incoming and outgoing product and define the maximum number of loads that should be in queue at processes that cannot be connected to create continuous flow. When the maximum number of loads has been reached, the internal supplier should cease operations because any further work will exceed space allocations and add to the chaos. The internal supplier can be utilized in other areas that add value.
•Shine the remaining WIP. Check the WIP for damage and to ensure only product of acceptable quality criteria will proceed through the balance of the process steps.
•Standardize how future WIP will be processed. Establish procedures for material handlers (if used), organize the work area to accommodate FIFO processing, and, as stated above, limit the number of locations for staging work from the internal supplier.
•Sustain the new process. Continually review customer demand, adjust takt time as necessary, determine customer/supplier capacities, and rebalance work requirements between process steps to create smooth, continuous flow.
Getting control of work-in-process is not an insurmountable task, but it does require a well-defined plan that starts with a visit to gemba so you will best understand the current situation. If you are unsure of how to develop an executable plan, check CabinetMaker+FDM archives for articles on the Tactical Planning Tool or contact me directly. If you would like to talk to Ron or any other executive of a company successfully transforming their company to the Lean business model, I will be happy to provide their contact information.
Next time we will look at applying Extreme 5S thinking to developing a marketing strategy.
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