1. PAPER PRESENTATION ON
IMPACT OF LEAN PRODUCTION STRATEGY IN DIFFERENT SECTORS
PRESENTED BY
MRS.B.Ramya HariGanesan., M.F.C., M.PHIL.
RESEARCH SCHOLAR
16A/8, GANDHI NAGAR III Street,
Opp. to good shepherd institute of medical ACADEMY
RaNiPeT,
Vellore Dt.623401
IN
INTERNATIONAL CONFERENCE ON
INNOVATIVE PRACTICE IN GLOBAL BUSINESS
IN THE THEME INTERNATIONAL MANAGEMENT
HELD ON
FEBRUARY 5TH, 2014
BY
DEPARTMENT OF MANAGEMENT STUDIES
(CENTRE FOR CREATIVE LEADERS & ENTREPRENEURS)
IN
NEHRU INSTITUTE OF TECHNOLOGY
(APP. AICTE, NEW DELHI AND AFFILIATED TO ANNA UNIVERSITY OF TECHNOLOGY, COIMBATORE)
KALIAPURAM, THIRUMALAYAMPALAYAM,COIMBATORE-641105,
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2. IMPACT OF LEAN PRODUCTION STRATEGY IN DIFFERENT SECTORS
INTRODUCTION:
ORIGINS OF LEAN
The early phase of the M.I.T. International Motor Vehicle Program (IMVP) saw the first use of the
term ―lean manufacturing‖ (or ―lean production‖) to describe a revolutionary approach to manufacturing
observed in the study, as contrasted with the mass production tradition. As a concept, ―lean‖ includes
several of the popular concepts of management research, such as Total Quality Management (TQM),
Continuous Improvement, Integrated Product Development (IPD), and Just-In-Time (JIT) inventory
control. Lean manufacturing attempts to unite these niche topics into a unified philosophy for producing
products. Indeed, to succeed as an overall business philosophy, lean principles must incorporate areas
outside of manufacturing—the entire product development process. Much of the research related to these
other areas has been incorporated into the lean paradigm.
For example, much of the product development research in the auto industry done by Clark and
Fujimoto at Harvard Business School fits into the IMVP work. Concepts of leadership, teamwork,
communication, and simultaneous development all became aspects of lean. As the lean paradigm receives
wider application, further refinement and elaboration of its tenets becomes necessary. One area currently
attempting to apply lean principles to its unique context is the defense aircraft industry.
WHAT IS LEAN MANUFACTURING?
Lean production is an integrated set of activities designed to achieve production using minimal
inventories of raw materials, work in progress, and finished goods. Lean is also based on the logic that
nothing will be produced until it is needed.
BREAK THROUGH MOMENTS IN LEAN FROM 1500 TO 2007
YEAR
1500
1780
1799
1822
1860
1880
1890
1902
1908
1913-1914
1924
1926
1930
PROCESS
Flow production
DETAILS
Venetian arsenal introduces floating assembly line for boats
of standard design.
Concept of interchangeable parts
French army ordinance introduced it for High-volume flow
production
Automatic production of simple parts
Marc Brunel devises water powered equipment for making
rope blocks for ship which reduces labour cost.
Automatic production of complex Thomas Blanchard makes gun stock for rifles with no
parts
manual labour.
High-volume interchangeable parts
Samuel colt’s Armory in Hartford produces high volume of
pistols with completely interchangeable parts.
Moving Disassembly line
American meat packers used conveyors to steadily move
carcasses to remove the bone.
Scientific management
Frederick Taylor introduces piece-rate bonus system
scientifically to spur effort and tying complex production
paths together and he also introduced cost accounting to
allocate overheads to machine and labour hours.
Invention of JIDOKA
This machine finds out the broken threads in loom and
automatically stops production of defective cloth which was
invented by Sakichi Toyoda which reduces multi worker job
to single worker.
Truly interchangeable parts
Hendry ford introduces a modular car with interchangeable
parts to reduce waste
Moving assembly line with parts Hendry ford’s High land park plant pioneers ―Flow
fabrication
production‖ by placing fabrication equipment in process
sequence and operating whole factory at the rate of the final
assembly line.
Quick changeovers
G-type loom introduced for quick changeover.
Mass production
Hendry Ford introduced Mass production in 50 final
assembly plants around the world
Take time
Take time is introduced which means that the cycle time for
the work at each station must be precisely analyzed to keep
it below the take time. German Aircraft introduced follows
Mitsubishi and later brings the idea to Toyota Japan.
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3. 1937
1941-1945
1950
1960
1965
1973
1979
1983
1987
1990
1996
1997
1998
2005
2007
Just in Time
Kiichiro Toyoda introduced this concept in Toyota motor
company
Training within Industry
During War U.S dept of War started this method which was
further implemented in Toyota to make workers to work in
standard manner.
Kanban and Supermarkets
Taichi Ohno develops practical methods to implement JIT
Lean Management
Under leadership of Fiji Toyoda Toyota Motor company
creates a management system with new approach to problem
solving, leadership, production operations, supplier
collaboration, product and process development and
customer support called lean management.
Quality as a key element of a W.Edwards
Deming’s
PDCA
(Plan-Do-Check-Act)
management system.
introduced.
Mass production Management
Alfred slogan published a book to describe MANAGE BY
METRICS SYSTEM followed in General motors for mass
production.
First Academic Investigation
MIT launches the future of the automobile program to study
new methods of designing and producing products in Japan.
Direct diffusion
Introduced TPS outside Japan by Toyota and General
Motors.
Lean Introduced
John Krafcik a young researcher in the MIT International
Motor vehicle program proposes a label for the combination
of production, product development, supplier collaboration,
customer support, and quality and management methods
pioneered by Toyota.
In the book The machine that changed Jim Womack, Dan Jones and Daniel Roos provide
the world
exhaustive evidence of the competitive superiority of the
complete system
Lean thinking
Jim Womack and Dan Jones provide a simple description of
lean principles.
Lean Enterprise Institute
Jim Womack creates a non-profit, education, publishing and
research organization to promote lean principles.
Value stream maps
Mike Rother and John Shook introduced this to broad
audience.
Lean solutions
Jim Womack and Dan Jones apply the process thinking at
the heart of the lean thinking to consumption.
Lean global network
Organizations around the world promotes lean thinking
Lean as No.1
Toyota and General Motors successfully implemented lean
and become successful.
Source.www.lean.org
LEAN GOALS AND STRATEGIES:
The espoused goals of lean manufacturing systems differ between various authors. While some
maintain an internal focus, e.g. to increase profit for the organization, others claim that improvements
should be done for the sake of the customer. Some commonly mentioned goals are:
Improve quality: To stay competitive in today's marketplace, a company must understand its
customers' wants and needs and design processes to meet their expectations and requirements.
Eliminate waste: Waste is any activity that consumes time, resources, or space but does not add
any value to the product or service.
Reduce time: Reducing the time it takes to finish an activity from start to finish is one of the most
effective ways to eliminate waste and lower costs.
Reduce total costs: To minimize cost, a company must produce only to customer demand.
Overproduction increases a company’s inventory costs because of storage needs.
STRATEGIES OF LEAN:
Lean as a fixed state or goal (being lean)
Lean as a continuous change process (becoming lean)
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4. Lean as a set of tools or methods (doing lean/toolbox lean)
Lean as a philosophy (lean thinking)
The following steps should be implemented to create the ideal lean manufacturing system
Design a simple manufacturing system
Recognize that there is always room for improvement
Continuously improve the lean manufacturing system design
This is depicted in the figure given below:
IMPACT IN DIFFERENT SECTORS:
GLOBAL BUSINESS SCENARIO:
Global business consists of transactions that are devised and carried out across national borders
to satisfy the objectives of individuals, companies, and organizations. These transactions take on various
forms, which are often interrelated. Primary types of international business are import export trade and
foreign direct investment (FDI). The latter is carried out in varied forms, including wholly owned
subsidiaries and joint ventures. Additional types of international business are licensing, franchising, and
management contracts. As the definition indicates, and as for any kind of domestic business, ―satisfaction‖
remains a key tenet of global business. Beyond this, because transaction environmental factors, to different
constraints, and to quite frequent conflicts resulting from different laws, cultures, and societies. The basic
principles of business still apply, but their application, complexity, and intensity vary substantially. To
compete themselves in the global business all people in different sectors finding many improvement tools
to improve their business which is depicted below,
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5. As depicted above one of the tools is Lean. As we see compared to all the sectors Auto/Auto/AWC,
Electronics, consumer goods, Capital goods, power generation sectors are implementing lean for their
benefit.
It is evident from the above chart that the sectors which implements lean show considerable improvement
compared to others in productivity.
AUTO INDUSTRY:
India's auto industry has made strides, but it can do more to meet its full potential: active and
favorable policy interventions, infrastructure building, investments in technology and R&D, and the
development of a healthy and sustainable automotive ecosystem. A collaborative approach by OEMs, the
government, and other stakeholders will achieve this growth.
In order to achieve this growth Lean Principals, first introduced by Taichi Ohno of Toyota Motor
Company, have been influencing large and small businesses worldwide by providing a blue print on ways
to reduce waste while increasing productivity. Today’s leading companies like Ford, Dell, Southwest
Airlines, and FedEx are reworking their business models based on adopting Lean principles and are
reaping tremendous benefits that continue to insure their success in their respective markets. It is a natural
migration of these Lean principals from Lean Manufacturing, to Lean Maintenance, to Lean Predictive
Maintenance, to Lean IR. Concepts that have provided the insurance of the rebirth of the IR program at
Ford’s DSP. Fords Rouge Dearborn Stamping Plant (DSP) has been leading the way with adopting these
Lean concepts to their IR Program to be able to increases their up time dramatically by the integration of
Lean Thinking with their IR program. ―I would like the Rouge again to be the most copied and studied
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6. industrial complex in the world. My great-grandfather would have thought this was fantastic.‖ William C.
Ford Jr. Chairman & CEO, Ford Motor Company.
EXPERIENCE OF SUNDARAM CLAYTON
Sundaram Clayton Limited (SCL) is part of the USD4 billion TVS group, one of the largest auto
components manufacturing and distribution group in India.SCL is a leading supplier of aluminum die
castings to the automotive and non-automotive sectors. The company commenced operations in 1962 in
collaboration with the UK based Clayton Dewandre Holdings Limited (now part of WABCO
Automotive group). It Manufactures aluminum pressure die castings for heavy commercial vehicles,
passenger cars and two wheelers. Its product range includes flywheel housing, gear housing, clutch
housing, filter heads, air connectors, lube oil cooler cover assembly, filtration module casting,
turbochargers, compressor cover assembly, charge air pipes, intake manifold and cover coolant duct for
the truck segment; cylinder head, case transaxle assembly, oil pan, chain case, cylinder head cover,
adaptor oil filter, fuel pump housing, fork gear shift, starter housing and A/C compressor housing for
passenger cars; and crank case, cylinder head, cylinder barrel and wheel hub for powered two wheelers
and brake equipment valve bodies. SCL started its total quality management (TQM) processes in the late1980s.Prior to introducing TQM; the company had a traditional manufacturing layout and hierarchical
organizational structure leading to inefficiencies and waste. During that time, the man to machine ratio
was 3:1. That meant each machine required three workers – one to load and unload the product, another to
switch on the machine and the third to inspect the quality of the product. Similarly, since the plant layout
was process-oriented, it resulted in the buildup of inventories. Also, the communication among various
peer groups was poor. Moreover, both middle level management and the workers resisted change. After
undergoing a thorough diagnosis of these issues, SCL decided to adopt a three-phase implementation of
TQM. This involved encouraging the culture of quality control and quality Assurance, which was achieved
through intensive staff education and training. The implementation of TQM enabled the company to not
only increase its market share, profit and the productivity of workers but it also helped in getting business
from overseas players. SCL was awarded the Deming prize for quality in 1998.
IMPROVEMENT IN BAJAJ AUTO THROUGH LEAN PRODUCTION:
Bajaj Auto is one of the largest automobile companies in India and has been in business for over
four decades. The company is ranked as the world's fourth largest two and three- wheeler manufacturer.
During the 1980s and 90s, the manufacturing model adopted by the company resulted in inefficiencies,
higher fixed costs and a large inventory with hidden quality issues. During the late 1990s and early 2000s,
strong competition and growing customer aspirations led the company to move to:
Lean manufacturing (on the lines of the Toyota Production System)
Total Productivity Management (TPM)
Statistical Process Control (SPC) in manufacturing operations
The lean manufacturing drive involved reorganization and a fundamental redesigning of Bajaj Auto’s core
business processes. The objective was:
To create a high performing organization by restructuring, re-staffing and establishing a
performance management system
Launch new products
Restructure channels and build capability to increase retail sales, dealer profits and overall
customer satisfaction
Implement an integrated ERP system
Reduce purchasing costs
Cut down conversion costs
The main aim was to boost the top line 100 per cent and bottom line 10 per cent. The move towards a
lean manufacturing process resulted in significant gains for the company. Bajaj Auto’s workforce
productivity raised 10 times. The company was able to reduce the inventory for raw materials from one
week to half a shift stock. The inventory for finished goods was cut down from one month to three days.
The number of rejected items was reduced from 20,000 parts per million (PPM) to less than 2,000 PPM.
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7. IT SECTOR
WIPRO LTD:
When speaking of Lean Production, it usually refers to manufacturing industry such as automobile. However, with its great success, it has been adopted across industries including health care and IT
outsourcing. Wipro did a great job of translating ―Lean Principle‖ to IT outsourcing. When the chief
global delivery officer at Wipro wanted to deal with rising wage inflation and growing complexity in large
outsourcing contracts, McKinsey suggested the Lean Principle. With further investigation at options that
included the Malcolm Bald ridge National Quality Award criteria, TRIZ (short for Theory of Inventive
Problem Solving in Russian), and Toyota's Lean, Wipro decided to apply the Lean exercises. What Wipro
tried to do is more than just reduce their cost, but differentiate itself from its peer competitors based on
quality and delivery of its software products as well.
Wipro did successfully apply the lean principle into IT outsourcing. Before adoption of TPS, Wipro had
implemented Six Sigma quality control system as well.
AEROSPACE INDUSTRY:
Goodrich, a supplier of products and services to the aerospace industry, began implementing Lean
techniques in 1995, adapting tools from the Toyota Production System. Kaizen events serve as the driving
force behind a waste elimination-focused culture change with the company conducting over 350 events
each. Goodrich has used kaizen events to assess hazardous environmental waste streams, identify and
implement pollution prevention and process improvement techniques, and to target environmental, health,
and safety (EHS) issues. EHS objectives must be identified for all kaizen events, and efforts must also be
made to involve EHS personnel if an event is likely to have important environmental dimensions, risks, or
opportunities. Several Goodrich sites have also converted to cellular manufacturing while other facilities
have shifted to Lean point of use chemical management systems to eliminate wasted worker movement,
which also reduced chemical use
PHARMACEUTICAL INDUSTRY:
In the pharmaceutical industry, traditional batch manufacturing processes are proving to be too
inefficient for today’s world of economic pressures and increased global competition. New moves by
regulatory agencies are encouraging the development of new manufacturing technologies by building
quality into the process and using a science-based quantified risk approach, by starting to lay the
groundwork for continuous manufacturing with several initiatives, and with regulatory frameworks such as
process analytical technology (PAT) and quality by design (QbD). Both the chemical and food processing
industries have been improving their productivity by successfully integrating continuous manufacturing
into their plants. It is clear that regulatory hurdles and conservative thinking by the pharmaceutical
industry can no longer be used as an excuse to avoid taking pharmaceutical manufacturing into the 21st
century.
MANUFACTURING SECTOR:
In a plant operated by the Spicer Axle Division of Dana Corp., manufacturing engineers set out to
use the six-sigma DMAIC (Design, Measure, Analyze, Improve, Control) methodology—in conjunction
with lean manufacturing—to meet customer requirements related to the production of tubes used to
manufacture axles. Those requirements were related to both quality and production. The objective of the
lean effort devoted to the tube line was to reduce quality defects It's important to note that after lean
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8. manufacturing principles were implemented, the tube line was also used as a pilot cell for other layout
designs throughout the plant.
The Problems identified like, Line’s unbalanced nature, Long runs of Work in progress are rectified using
New tube lay out there was a considerable change in the production process which results in,
WIP decreased by 97%,
Production increased 72%,
Scrap was reduced by 43%,
Machine utilization increased by 50%,
Labor utilization increased by 25%,
Labor costs were reduced by 33%, and
Sigma level increased from 2.6 to 2.8,
In summary, the production group wanted to develop a process to decrease product cost while
achieving improved quality level, decreased defects, increased production throughput, and improved
production capacity, while providing a design that would not impose a limit on the number of operators.
This project yielded reduced labor and scraps costs, and allowed the organization to do a better job of
making deliveries on time, while allowing a smaller finished-goods inventory. Daily production numbers
and single-part cycle time served as a benchmark for monitoring progress towards the realization of the
goal. Although the sigma level increase was not immense, the 43% reduction in defects, 97% reduction in
WIP, and production increase of 72% contributed to the project objective.
LEAN IN SERVICES SECTOR:
Services
Organize problem solving
groups
Upgrade House Keeping
Upgrade Quality
Clarify process flows
Revise equipment and
process technologies
Level the facility load
Eliminate unnecessary
activities
Corporate Used
First Bank/Dallas
Standard Meat Company
Miller Brewing company
British Airways
Mc Donald’s
Disney Land
Speedi-Lube
Mc Donald’s
Federal Express Corporation
Speedi-Lube
Mc Donald’s
Retail stores
Speedi-Lube
Reorganize physical
configuration
Speedi-Lube
Introduce demand pull
scheduling
Wendy’s restaurants.
Benefits enjoyed
 To improve services
 To implement new service practices




Service processes work better
Continuous improvement easier to develop
Customer satisfaction
Provides better services and produces quality products and
services consistently
 By changing the process it achieved first place in air Freight.
 To perform a wider range of operations without reducing the
operation room availability
 Synchronies production with demand and gained customer
satisfaction
 Reengineering to improve the process consistency
 To reduce the time to perform the tasks
Through which they increased their goodwill.
 They organize micro clinics inside the hospitals so that they
need not route patients all over the hospitals for various tests.
 Cooks will put hamburger onto the grill, when the car is
entered into the restaurant so that it will be ready in their
table even before ordering. This gained many customers to
the restaurants.
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9. CONCLUSION:
RISKS IN LEAN PRODUCTION:
High cost of implementation
Lack of acceptance by employees
Heavy investment needed at initial stage
As we discussed earlier for a best system to be implemented for a long run corporate should face
some initial risks. After overcoming such risks through lean production strategy corporate can
enjoy lots of benefits not only to the manufacturing sector but also to the service sectors. It is
evident from the above case studies that many companies have enjoyed improvement. In order to
enjoy continuous improvement like the initial improvement after implementation managers should
have complete understanding about lean approach. This understanding will lead their corporate in
their way of success as Toyota Motors ltd achieved.
BIBLIOGRAPHY:
BOOKS AND MAGAZINES:
1. Richard B.Chase, Ravi Shankar, F.Robert Jacobs, Nicholus J.Aquilano. Operations & Supply
Management, Tata McGraw Hill Education Private Limited, New Delhi, 2010.
2. Czinkota, Michael R., Ilkka A. Ronkainen and Michael H. Moffett. Fundamentals of International
Business. Mason: South-Western, 2004.
3. Wood J. L. (2012) Disadvantages of Lean Manufacturing. Retrieved March 8, 2012, from
http://www.ehow.com/list_6025715_disadvantages-lean-manufacturing.html#ixzz1nf9nyHmv
4. Kropf, P. (2008). What is Lean Manufacturing. Retrieved March 1, 2012, from
http://pkropf.wrytestuff.com/swa290247.htm
5. Kelly, M. (2012). Advantages & Disadvantages of Lean Production. Retrieved March 5, 2012,
from http://www.ehow.com/about_5418429_advantages-disadvantages-lean-production.html
6. Womack, James P. and Jones, Daniel T. Lean Thinking: Banish Waste and Create Wealth in
YourCorporation. Simon & Schuster, 1996.
WEBSITES:
1. www.lean.org
2. www.tnvrstar.expertscolumn.com
3. www.mindtools.com
4. www.ibef.org
5. www.pwc.com
6. www.iiste.org
7. www.leanbusiness.ie
8. www.scribd.com
9. www.icheme.org
10. www.slideshare.net
11. www.sme.org
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