APPLICATION OF LEAN MANUFACTURING PRINCIPLES TO CONSTRUCTION

Transcription

1 APPLICATION OF LEAN MANUFACTURING PRINCIPLES TO CONSTRUCTION by James E. Diekmann, Mark Krewedl, Joshua Balonick, Travis Stewart, and Spencer Won A Report to The Construction Industry Institute The University of Texas at Austin Under the Guidance of Project Team Number 191 Austin, Texas July 2004

2 Executive Summary Over the past three decades, the US construction industry has seen a decline in both its share of the gross national product and its annual productivity growth rate. The quality of construction has faltered during this period as well. In contrast, the US manufacturing industry has made significant progress in increasing productivity and product quality while lowering product lead times. Manufacturing has essentially made the transition from second class to world class. The improvements in manufacturing processes have included reducing the amount of human effort, space and inventory required in the factory and increasing the quality and variety of products and the flexibility of manufacturing operations. The application of lean production principles to manufacturing processes has been instrumental in achieving these results. Lean principles were developed in post World War II Japan at the Toyota Motor Company. These principles evolved from geographic and economic constraints, from top-down, management-led innovation and from bottom-up pragmatic problem solving. They became collectively known as the Toyota Production System (Womack et al. 1990). The principles of lean theory are conceptualized at the process, project and enterprise or organization levels. Various principles, methods and tools can be applied at each level, so that lean production becomes an inclusive philosophy aimed at continuously improving the entire production organization as well as the physical production process. If manufacturing can make such vast improvements in quality and productivity, while reducing costs and lead times, why not construction? This report identifies the core principles of lean production, compares and contrasts the manufacturing and construction industries, and identifies the potential for implementing lean principles in the construction industry. The research team started with the following definition of lean construction: Lean construction is the continuous process of eliminating waste, meeting or exceeding all customer requirements, focusing on the entire value stream and pursuing perfection in the execution of a constructed project. This definition includes many fundamental aspects of a lean philosophy. It is a philosophy that requires a continuous improvement effort that is focused on a value stream defined in terms of the needs of the customer. Improvement is, in part, accomplished by eliminating waste in the process. Lean philosophy, broadly defined, can apply to design, procurement and production functions. To help define and direct research efforts and to present an elemental contribution to understanding lean principles in construction, the scope of this report was limited primarily to construction field operations. Although the focus of the inquiry was field operations, researchers were sensitive to the effects of policy and actions that occur at the enterprise, project and process levels. Two considerations led the research team to focus primary attention on construction field operations. First, field operations are where most of the value is added from the customer s point of view. Cognizance of customer value is central to a lean philosophy. Second, other researchers have studied value streams and other aspects of lean philosophy. iii

3 From this basis, the following questions were developed: Are lean principles as defined in manufacturing applicable to the construction industry? If not, are there other principles that are more appropriate for construction? What is the nature of the typical construction production value stream? How should conformance to lean principles be measured? Are lean principles commonly used in the construction industry? What is the path forward to becoming lean? What are the roadblocks to adopting a lean culture? These questions were investigated using a multifaceted approach. First, lean literature was examined from manufacturing, construction and other industries such as shipbuilding, aerospace, and software engineering. Second, advice from lean manufacturing pioneers was used, and the construction production value stream was studied. Next, contractors (both lean and non-lean) were surveyed to learn about lean practices that are currently employed in the construction industry. Using all of this information, a set of lean principles was developed that is appropriate for construction. In general, it can be concluded that construction owners and contractors would significantly benefit from the adoption of lean principles and behaviors. The value added portion of the typical field construction value stream is exceedingly small, comprising approximately 10 percent of all crew level activities. It was determined that lean behavior among construction contractors is rare, even with contractors who are actively pursuing the lean ideal, because being truly lean requires changes to every aspect and level of a company. Additionally, becoming a lean contractor is difficult in part because of the dynamic nature of construction, but mostly because construction contractors control such a small portion of the construction value stream. For those wishing to start the lean journey in their company, a lean workplace can be created using the following steps: Identify waste in field operations. Drive out waste. Standardize the workplace. Develop a lean culture. Involve the client. Continuously improve. iv

4 Becoming lean is a long-term, comprehensive commitment; it amounts to a cultural change for the company. Construction is no simple deterministic system. Lean principles must be understood and applied in a context and require a comprehensive understanding of a complex, interacting and uncertain construction system. Many lean principles can be understood as attempts to increase preplanning ability, improve organizational design and increase flexibility. In this light, the final conclusion is that lean cannot be reduced to a set of rules or tools. It must be approached as a system of thinking and behavior that is shared throughout the value stream. Given that contractors control such a small portion of the construction value stream (as compared to their manufacturing counterparts), this is the challenge that faces the potential lean contractor. If successfully applied, however, lean has the potential to improve the cost structure, value attitudes and delivery times of the construction industry. v

5 Contents Executive Summary... iii 1.0 Introduction Are Lean Manufacturing Principles Useful in Construction? History of Lean Production The Diffusion of Lean Ideas Research Questions Organization of Report Lean Theory and Literature Predominant Types of Manufacturing in the 20th Century: Conversion Model Versus Flow Model Fundamental Lean Principles Beyond Lean Manufacturing Differences Between Construction and Manufacturing Lean Principles Core Manufacturing Lean Principles Core Construction Lean Principles Comparison of Construction and Manufacturing Research Methodology Restatement of Research Questions Developing Lean Principles for Construction Goals Approach Measuring Lean Conformance Goals Approach Value Stream Mapping Bringing It Together Creation and Use of a Lean Assessment Instrument Foundation/Design of the Questions Design of the Questionnaire Using Field Studies Case Study Interviews Early Adopter Interviews Validation of the Questionnaire Stage One: Pilot Work Stage Two: Focus Group Responses Stage Three: Statistical Reliability Analysis Use of Lean Principles in Construction Customer Focus Culture/People Workplace Standardization Waste Elimination Continuous Improvement/Built-In Quality...49 vi

6 Contents (Continued) 5.7 Case Study Interview Results Customer Focus Culture/People Workplace Standardization Waste Elimination Continuous Improvement/Built-In Quality Early Adopter Interview Results Customer Focus Culture/People Workplace Standardization Waste Elimination Continuous Improvement/Built-In Quality Survey of Lean Implementation in Construction Literature Lean Implementation Case Studies at the Process Level Lean Implementation Case Studies at the Project Level Lean Implementation Case Studies at the Organization Level Evaluating a Construction Value Stream Construction s Production Value Stream Categories of Work VA Definition NVAR Definition NVA (Waste Definitions) Data Collection Procedure Hand Data Collection Method Video Data Collection Case Studies Case Study No Case Study No Case Study No Case Study No Case Study No Case Study No Data Analysis Value Stream Analysis Results Structural Steel Case Studies Process Piping Case Studies Comparison of Processes Value Stream Analysis Identifying Construction s Value Stream Developing a Construction Value Stream Map Building a Value Stream Map New Approach to Value Stream Mapping Level Three Level Two Level One New Idea for Displaying the Construction Value Stream How Do the Value Stream Maps Differ Between Processes? vii

7 Contents (Continued) 7.0 Results - Lean Principles for Construction Assessing Lean Principles for Construction Customer Focus Culture/People Workplace Organization/Standardization Waste Elimination (Aspect 1: Process Optimization) Waste Elimination (Aspect 2: Supply Chain) Waste Elimination (Aspect 3: Production Scheduling) Waste Elimination (Aspect 4: Product Optimization) Continuous Improvement and Built-In Quality An Information-Based Perspective on Lean Principles Applying Lean Principles to Construction Conclusions and Recommendations Reasons to Apply Lean Principles to Construction Path Forward to Becoming Lean Identify Waste in Field Operations Drive Out the Waste Standardize the Workplace Develop a Lean Culture Get the Client Involved with the Lean Transformation Continuously Improve Barriers to Developing a Lean Company Little General Understanding of Lean Unique Projects and Unique Design Lack of Steady-State Conditions No Control of the Entire Value Stream Future Research Lean Coordination Economics of Lean Importance of Repetition Reliability in Construction Metrics for Lean Construction Appendix A Case Study No.1 - Structural Steel Appendix B Case Study No. 2 - Structural Steel Appendix C Case Study No. 3 - Structural Steel Appendix D Case Study No. 4 - Process Piping Appendix E Case Study No. 5 - Process Piping Appendix F Case Study No. 6 - Process Piping Appendix G Lean Questionnaire and Principle Cross-Reference Appendix H Interview Notes Appendix I Worker Movement Study No Appendix J Worker Movement Study No References Glossary Acknowledgments viii

8 List of Tables Table 2.1 Comparison of the Conversion Model and Flow Model...11 Table 2.2 Knowledge Areas of Management Theories...19 Table 3.1 Comparison of Lean Manufacturing to Lean Construction Principles...28 Table 3.2 Lean Construction Principles...32 Table 5.1 Cronbach s Alpha Results...48 Table 6.1 Comparison of Lean Manufacturing to Lean Construction Waste...62 Table 6.2 Advantages and Disadvantages of Different Data Collection Methods...65 Table 6.3 Typical Results for Welder Completing an Eight Inch Diameter Spool Section...67 Table 6.4 Typical Results for an Entire Crew...68 Table 6.5 Results for Case Study No.1 - Structural Steel Erection Process...70 Table 6.6 Quick Summary for Case Study No Table 6.7 Results for Case Study No. 2 - Structural Steel Erection Process...71 Table 6.8 Quick Summary for Case Study No Table 6.9 Results for Case Study No. 3 - Structural Steel Erection Process...71 Table 6.10 Quick Summary for Case Study No Table 6.11 Results for Case Study No. 4 - Piping Installation Process...73 Table 6.12 Quick Summary for Case Study No Table 6.13 Result for Case Study No. 5 - Piping Installation Process...74 Table 6.14 Quick Summary for Case Study No Table 6.15 Comparison of Different Processes...75 Table 6.16 Work Distribution Lifecycle Data...89 Table 7.1 Principles that Reduce Uncertainty in the Production Environment without Increased Planning or Information Handling Table 7.2 Principles that Require Added Planning or Information Handling but Reduce Uncertainty in the Production Environment Table 7.3 Principles that Require Added Planning or Information Handling but Reduce the Negative Effects of Instability in Production x

9 List of Figures Figure 1.1 Manufacturing Performance (Anecdotal)...2 Figure 1.2 The Beginnings of Lean Production...4 Figure 2.1 Conversion Process...8 Figure 2.2 The Conversion Model of Production...8 Figure 2.3 Generalized Flow Model...10 Figure 2.4 Simplified Value Stream...10 Figure 2.5 The Flow Model of Production...10 Figure 2.6 Delineation of Activities...12 Figure 2.7 Lean Production Conceptualization...17 Figure 4.1 Overall Lean Construction Research Plan...36 Figure 4.2 The Lean Wheel (after Tapping, Luyster et al. 2002)...37 Figure 5.1 Example of a Seven-Point Likert Scale Question...42 Figure 6.1 Hand Data Collection Sheet...63 Figure 6.2 Typical Results for Welder Completing an Eight Inch Diameter Spool Section...68 Figure 6.3 Typical Results for an Entire Crew...69 Figure 6.4 Traditional Value Stream Map...79 Figure 6.5 Structure for a New Value Stream Map...80 Figure 6.6 Level Three Data...81 Figure 6.7 Level Two...82 Figure 6.8 Typical Setup for a Substage Box in the Value Stream...82 Figure 6.9 Main Stage from Level One Along with Required Substages from Level Two...83 Figure 6.10 Level One...86 Figure 6.11 Work Distribution Life Cycle Graph...88 xii

10 1.0 Introduction 1.1 Are Lean Manufacturing Principles Useful in Construction? Over the past three decades, the US construction industry has seen a decline in both its share of the gross national product and its annual productivity growth rate. The quality of construction has faltered during this period as well, with studies showing the cost of construction nonconformance reaching as high as 12 percent of total project costs (Koskela 1992). In contrast, the US manufacturing industry has made significant progress in increasing productivity and product quality while lowering product lead times: How have manufacturing organizations achieved the following results? Half the amount of human effort required in the factory. Half the manufacturing space required. Half the engineering hours to develop a new product. Less than half the inventory needed onsite. Increased quality of products. Increased variety of products. Increased flexibility of manufacturing operations. Decreased lead times. (Womack et al. 1990) The application of lean production principles to manufacturing processes has been instrumental in achieving these results. This report explores whether these same principles may be applied to construction processes to effect similar production improvements. 1.2 History of Lean Production Over the past three decades, US manufacturing has seen a resurgence in quality, flexibility and productivity, while also managing to lower product lead times and the cost of production. In other words, US manufacturing has made the transition from second class to world class (Schonberger 1996). According to Richard J. Schonberger, World Class Manufacturing: The Next Decade, much of this rebirth has been the result of an increased focus on production cycle times and quality. Subsequently, manufacturing management has seen a shift from conventional practices of planning and control to a focus on interactive sets of principles aimed at achieving and facilitating benefits, such as lower cycle times. Figure 1.1 (adapted from Schonberger 1996) illustrates the described performance trend in US manufacturing over the last half of the 20th century. 1

11 Figure 1.1: Manufacturing Performance (Anecdotal) Schonberger provides the v-pattern to illustrate the fall and rise of US manufacturing performance caused by both internal and external factors. The figure is not a direct depiction of economic indicators, but rather a representation of anecdotal evidence (Schonberger 1996). The negative trend seen between the 1950s and 1970s occurred at a time when manufacturing in the United States was just coming out of what is known as the post World War II production era. At this time, product shortages within the United States increased demand and, subsequently, manufacturing was focused on producing large quantities of products. When supply had finally surpassed demand, the nation began to see the proliferation of excess capacity. During the early 1960s, international competition also began to increase its share of the world manufacturing market. With the immediate threats of excess capacity and foreign competition, the focus of manufacturing in the United States needed to change from producing volume to producing higher quality products at minimal cost and lead times. But how was the United States going to change from large-scale mass production pioneered by the late Henry Ford to more agile, customerfocused production? The answer to this question has been the diffusion of Japan s highly successful production and management system termed lean production (Womack et al. 1990). The term was coined by John Krafcik, a researcher on the team from the International Motor Vehicle Program (IMVP) (Womack et al. 1990). IMVP was a team organized at the Massachusetts Institute of Technology during the mid-1980s with the objective of studying the innovative techniques used by the Japanese in their highly successful automotive industry (Womack et al. 1990). The logic of using the term lean will become clearer as the principles are clarified. The fundamental ideas of lean production have been described under numerous names as researchers and practicing professionals have sought to study and diffuse the core ideas. Names such as World Class Manufacturing (Schonberger 1997), New Production Philosophy (Koskela 1992), Lean Thinking (Womack and Jones 1996), Just-in-Time/Total Quality Control, Time Based Competition, and many similar methods and principles have been used to describe the same fundamental collection of ideas (Koskela 1992). The foundations of lean production were developed in post World War II Japan, when the Japanese manufacturing industry underwent a complete rebuilding (Womack et al. 1990). Lean pioneers Kiichiro Toyoda, Eiji Toyoda and Taiichi Ohno of the Toyota Motor Company developed many of the underlying principles of lean production in response to pragmatic considerations and existing geographic circumstances. The impetus for lean production occurred when Kiichiro, president of Toyota at the time, demanded that Toyota catch up with America in three years. Otherwise the automobile industry of Japan will not survive (Ohno 1988; Hopp 2

12 1996). At the time, limited supply of raw materials and inadequate space for inventory in Japan fostered an atmosphere in which concepts such as just-in-time (JIT) and zero inventories became necessary. During the spring of 1950, Eiji Toyoda visited American manufacturers, namely Ford s Rouge Plant in Detroit, to study mass production and perhaps look for ways to improve the country s own rebuilding industry (Womack et al. 1990). This was the second visit to study US manufacturing practices made by the Toyoda family; the first was made by Kiichiro in What Eiji Toyoda found was a system rampant with muda, a Japanese term that encompasses waste (Womack 1996). He noted that only the worker on the assembly line was adding value to the process. Another striking feature was the emphasis placed by their American counterparts on continually running the production line. This common practice was thought to be justified by the expense of purchasing such equipment. To the Japanese, this practice appeared to compound and multiply errors, a mistake the Japanese could not afford to make. Japan s labor productivity at the time was one ninth that of the United States, and it became obvious to Toyota that it could not compete with the United States by depending on economies of scale to produce massive volumes for a small market that did not have the same type of demand (Ohno 1988; Shingo 1981; Hopp 1996). Toyota then made the strategic decision to focus its manufacturing efforts not on massive volumes of a product but, rather, on many different products in smaller volumes. In his numerous experiments focused on reducing machine setup times, Ohno, Toyota s chief production engineer, noted that the cost of producing smaller batches of parts was less than that of producing larger quantities as practiced in the United States. This was true because making small lot sizes greatly reduced the carrying costs required for huge inventories, and the cost of rework was reduced because defects showed up instantly in smaller batches (Womack et al. 1990). Ohno also managed to reduce the amount of time required for machine setup from an entire day to three minutes, a task that enabled Toyota to increase the flexibility of its production lines as well as reduce production times. The concept of JIT was developed to complement this new production philosophy undertaken at Toyota. The model for JIT was the American supermarket, a relatively new idea to the Japanese in the 1950s (Hopp 1996). The American supermarket provided customers with what they needed, when they needed it and in the right amount needed. JIT further evolved to include concepts found to be crucial to the effective operation of the JIT system and that would later become goals of the system. These concepts are referred to as the seven zeros: zero defects, zero lot size, zero setups, zero breakdowns, zero handling, zero lead time and zero surging (Hopp 1996). The contributions of quality pioneer W. Edwards Deming to post World War II Japan altered the way Japanese manufacturers viewed quality. Deming s Total Quality Management (TQM) system permeated throughout organizations to create a quality culture, where quality became the primary goal of producers. After World War II, quality had taken a back seat to production, and it was reasoned that intensive inspection at the end of the process would be adequate. With its focus on the entire organization, TQM addressed issues that were relatively new to the manufacturing industry at that time, such as employee empowerment, continuous improvement and the concept of proactively building quality into products versus the reactive nature of inspecting for quality at the end of the process (Walton 1986). The Japanese would improve on the teachings of Deming and create what is known as Total Quality Control (TQC). Thus, coupled with the company s move toward multi-skilled teams, guarantees of lifetime employment and pay raises linked only to seniority within the company, Toyota began to create a culture in which the quality of its product improved dramatically. In addition to shifting the focus of Japanese manufacturers to quality, Deming also equipped them with the statistical tools to achieve it, such as Statistical Quality Control (SQC). The teachings of Deming and other quality gurus, such as Joseph Juran and Philip Crosby, fueled a quality movement within the Japanese manufacturing industry that would take decades to diffuse into mainstream Western 3

13 manufacturing and that would be highly influential to the development of lean production techniques. From this background, the Toyota Production System was created in the early 1960s through the combination of compensation for geographical restrictions, astute observation of current problems within the industry, development of JIT and the teachings of the quality movement, among other factors. It seems that postwar Japan, in its state of chaos, provided a perfect laboratory in which innovative thinking could be implemented and practiced (Womack et al. 1990). The actual process, however, took many years of trial and error. The Toyota Production System presents an outline of the foundations of lean production. Figure 1.2 illustrates the forces that influenced the development of lean production. Post World War II Japan (Toyota Motor Company) Limited Natural Resources Development of JIT Limited Space Mass Production Practices Lower Demand Quality Movement Additional Factors Beginnings of Lean Production Figure 1.2: The Beginnings of Lean Production In the late 1970s, this new production system was brought to the United States and contributed to a manufacturing renaissance that continued within the United States for the next three decades (Schonberger 1996). Studies have shown the incredible benefits lean production methods have brought specifically to the automobile manufacturing industry where the ideas originated. According to James P. Womack and Daniel T. Jones, two of the leading researchers of lean production systems and coauthors of numerous lean texts such as The Machine That Changed the World and Lean Thinking, lean automobile manufacturing has been characterized as using the following: half the human effort in the factory, half the manufacturing space, half the investment in tools, half the engineering hours to develop a new product in half the time. Also, it requires keeping far less than half the needed inventory on site, results in many fewer defects, and produces a greater and ever growing variety of products (Womack et al. 1990). The visible success of lean principles in the automobile industry and in manufacturing generally has prompted other industries to adapt and apply these concepts to achieve similar benefits. 4

14 1.3 The Diffusion of Lean Ideas Lean principles have been amended and expanded over the decades by those in other industries who are transferring lean ideas and successes to their respective industries. The software, aerospace, air travel and shipbuilding industries all have extensive efforts directed at applying lean principles to improve profitability and quality and reduce waste. The architecture, engineering and construction (AEC) industry has a far-reaching, worldwide effort to apply lean principles and practices. North America, Europe and South America have organizations devoted exclusively to studying lean ideas and applying them. In fact, the efforts of the AEC industry have led the way toward innovative ideas about the application of lean thinking to the construction industry. Koskela (1992, 2000) originated the idea that construction processes must be viewed as systems of transformations, flows and value adding actions, the so-called TFV model. Bertelsen (2002) expanded the manufacturing model of lean to include the ideas of construction as one-of-a-kind production, construction as a complex system and construction as cooperation. Ballard and Howell (1998) in their paper, What Kind of Production is Construction, describe differences between manufacturing and construction. In the United Kingdom, the Construction Task Force produced Rethinking Construction (The Egan Report) that applies the lessons of the manufacturing revolution to the construction sector in the United Kingdom. Another innovation in the application of lean theory to construction was the development of the Last Planner (Ballard 2000a) that emphasizes reliability in the planning function. Others (Matthews 2003; Ballard 2002c; Tommelein 2003; dos Santos 1999) have addressed the impact that lean principles have had on contracts, project delivery and project supply chains. In this way, the core idea of lean principles as originally set forth by Ohno was expanded and adapted throughout the manufacturing sector. Other management thinkers have coupled diverse management theories such as concurrent engineering and TQM to these core lean principles. Lean theory and lean applications for AEC design, procurement and production functions have received significant attention in many quarters around the world. 1.4 Research Questions The goal of the research team was to take what is already known about lean theory and practice from manufacturing and from construction s early adopters and distill that information into a straightforward set of lean principles for construction. The research team started with the following definition of lean construction: Lean construction is the continuous process of eliminating waste, meeting or exceeding all customer requirements, focusing on the entire value stream and pursuing perfection in the execution of a constructed project. This definition includes many fundamental aspects of a lean philosophy: Lean requires a continuous improvement effort. Improvement focuses on a value stream that is defined in terms of the needs of the customer. Improvement is, in part, accomplished by eliminating waste in the process. 5

15 A lean philosophy, broadly defined, can apply to design, procurement and production functions. Lean can apply to the enterprise or company level, to the project level and to the individual process level. To help define and direct research efforts and to present an elemental contribution to the understanding of lean principles in construction, the scope of this report was limited primarily to construction field operations. Though the focus of the inquiry was field operations, researchers were sensitive to the effects of policy and actions that occur at the enterprise, project and process levels. Two considerations led the research team to focus its primary attention on construction field operations. First, field operations are where most of the value is added from the customer s point of view, so cognizance of customer value is central to a lean philosophy. Second, others have studied various aspects of lean philosophy, and this information could be used as a foundation for this report. For example, Seymour (1996) and Ballard (2000c) have defined an agenda for lean construction across the entire project life. Arbulu (2002), Tommelein (2003) and London (2001) have addressed construction supply chains. Likewise, aspects of the design process to promote lean principles are discussed by Ballard (2000d), Koskela (1997) and Freire (2002), who have all addressed different aspects of lean design. Taking into consideration the history of lean principles and prior research, the following question was posed: Are lean principles as defined in manufacturing applicable to the construction industry? If not, are there other principles that are more appropriate for construction? To explore how manufacturing principles map to the construction process, these questions were defined: What is nature of the typical construction production value stream? What is the value stream for field production activities and for the field portion of material delivery and handling? After an understanding is gained about how lean principles apply or can be modified for construction, these questions may be addressed: How should conformance to lean principles be measured? Are lean principles commonly used in the construction industry? Finally, to benefit the Construction Industry Institute (CII) membership, the following two questions were considered: What is the path forward to becoming lean? What are the roadblocks to adopting a lean culture? 6

16 1.5 Organization of Report This report is organized into eight chapters and 10 appendices. Chapter 2 presents a comprehensive review of both manufacturing and construction literature on lean principles. Chapter 3 explores the differences between the manufacturing and construction domains. Chapter 4 describes the methodology used for this study. Chapter 5 describes the development of a questionnaire that can be used by a contractor to self-assess lean behavior. Chapter 6 describes the results of the value stream mapping studies. Chapter 7 communicates the study findings regarding lean principles for construction. Finally, Chapter 8 describes research team recommendations for the future of lean principles in construction. The appendices contain the details of each of the value stream case studies as well as information on the validation of the questionnaire and questionnaire interview notes. Additionally, the appendices contain two studies on the impacts of excess worker movement. 7

17 2.0 Lean Theory and Literature 2.1 Predominant Types of Manufacturing in the 20th Century: Conversion Model Versus Flow Model To fully understand lean production, it is important to become familiar with the two predominant types of production systems of the 20th century. Traditionally, US manufacturing has been viewed as a mass production system focusing primarily on the process of conversions (Koskela 1992). Figure 2.1 (adapted from Figure 3, Koskela 2000) illustrates this basic concept. Figure 2.1: Conversion Process The conventional breakdown of the manufacturing process into a series of activities, each undertaking the conversion of an input to an output, referred to as the conversion model or transformation model, is illustrated on Figure 2.2 (adapted from Rother 1998). This type of production system historically uses what is called a batch and queue theory (Womack 1996). Batch and queue refers to the theory that for machines to achieve a high utilization rate, they must be run continually. As a result of this, parts are manufactured in large batches at one process within a plant and then queued for the next process. Batch and queue theory leads to many manufacturing problems, such as bottlenecking and large inventories from high work-in-progress (WIP) levels. Figure 2.2: The Conversion Model of Production The inventories created by WIP are referred to in manufacturing as buffers (Womack 1996). Buffers generally reduce the variability of workflows within a plant by shielding downstream activities from uncertainties that might occur upstream, such as machine failure or differing machine output rates. Such buffers may be the result of WIP or even planned into the 8

18 manufacturing process. Buffers can be viewed as an advantage if high degrees of variability exist within the manufacturing process. Disadvantages associated with overbuffering include increased product lead times, increases in required working capital, as well as increased space requirements to produce and store the additional parts and components acting as the buffers. By using such queuing techniques, manufacturers also become susceptible to quick changes in the marketplace. For example, if demand in the market for a certain product decreases, the manufacturer may be caught with high levels of WIP acting as buffers and be forced to decide whether it would be financially feasible to complete the production of the product or to terminate production and scrap the partially completed work. The concept of manufacturing a product based on forecasted sales data and then selling it is referred to as push production (Womack 1996). This differs greatly from the idea of producing an item only when it has been ordered or purchased, which is pull production. In other words, the market for the product is pulling the production versus pushing the product out to the customer. The view of manufacturing as a process of conversions tends to emphasize push production. Thus, products are created because demand has been forecasted and then pushed onto the market. The conversion model of production views improvement of the production process as a subprocess task. For example, to improve the process on Figure 2.2, the producer would make efforts to improve each subprocess individually by either reducing the cost of the specific activity and/or by increasing the efficiency of the activity. Thus, in theory, by improving each activity (A, B, C), the entire conversion process will improve. This view is termed reductionist because it uses analytical reduction to break the process into its individual components and view each as a separate entity in need of improvement (Koskela 1992). Historically, improvements to the conversion model have focused on the implementation of new technologies such as automation and computerization (Koskela 1992). In their book, The Machine That Changed the World, James P. Womack, Daniel T. Jones and Daniel Roos provide an excellent descriptive summary of the typical mass producer: The mass producer uses narrowly skilled professionals to design products made by unskilled or semiskilled workers tending expensive, single-purpose machines. These churn out standardized products in very high volume. Because the machinery costs so much and is so intolerant of disruption, the mass producer adds many buffers extra supplies, extra workers, and extra space to assure smooth production. Because changing over to a new product costs even more, the mass producer keeps standard designs in production for as long as possible. The result: The consumer gets lower costs but at the expense of variety and by means of work methods that most employees find boring and dispiriting (Womack et al. 1990). The view of production as a series of conversions is fundamentally different from the second dominant type of production in the 20th century, the view of manufacturing as a flow model (Koskela 1992). Production as a flow process is one of the core ideas of lean production. Figure 2.3 (adapted from Rother 1998) represents a generalized flow model of production. 9

19 Figure 2.3: Generalized Flow Model Unlike the traditional view of production, the flow process does not view the production stream solely as a series of conversions. The conceptualization of manufacturing as a flow model delineates between those activities that add value to the process (conversion) and those that do not (Koskela refers to them as flow activities) (Koskela 1992). It should be noted that to avoid confusion about flow, this report will refer to activities that do not add value as non-value adding. By defining the different types of activities that occur in production, the focus of improvement does not become compartmentalized as on Figure 2.2, but rather envelops the entire value stream (Womack 1996). The value stream of a particular product consists of all activities and parties involved in its creation, from raw material suppliers to the customer as illustrated on Figure 2.4. Compartmentalized improvements can become troublesome to downstream activities if the particular cycle times of sequential operations are not matched. In other words, if Process A has half the cycle time of Process B, a material buffer will occur at Process B because it cannot keep up with the amount of work produced by Process A. Figure 2.4: Simplified Value Stream Examples of non-value adding activities, or muda, are large inventories, wait times, inspection time, WIP and overproduction (Womack 1996). Improvement to the system would then entail not only reducing the cost and improving the efficiency of the value adding activities, but also reducing and/or eliminating the non-value adding activities. Figure 2.5 (adapted from Koskela 2000) illustrates these concepts. Figure 2.5: The Flow Model of Production 10

20 Improving the system through waste elimination and conversion activity improvement allows all elements of the entire production process to be enhanced. The flow process tends to focus on the elimination of the large buffers found within mass manufacturing by emphasizing the constant movement of components from one value adding activity to the next. This type of system, also referred to as single-piece flow (Womack 1996), is associated with several benefits. First, the WIP levels are dramatically reduced, which also reduces the inventory space required as well as the capital to produce and stock extra inventories of partially completed products. Combined with reducing equipment setup times, low WIP levels can help a manufacturer become more responsive to market conditions. As a result, the producer lets the customer, or market, pull the production. Compared to the conversion model, flow operations are much more tightly controlled in terms of production times and supply chain coordination to minimize variability within the process. In fact, the introduction of time as an input to the production process is fundamentally different from the conversion model of production because the process is no longer conceptualized as solely an economic abstraction, but rather as a physical process (Koskela 1992). Time was considered important before the advent of the flow model, but the entire production system was not centered on time as a goal. This view of time is important because the flow process does not contain the buffers necessary to minimize variability within the manufacturing process and, therefore, must rely on the coordination of processes both internal and external to the plant. Table 2.1 and Figure 2.6 summarize the major differences between the two predominant production theories of the 20th century. Table 2.1: Comparison of the Conversion Model and Flow Model Description Conversion Model Flow Model Conceptualization Manufacturing as a series of conversion activities Manufacturing as a combination of value and non-value adding activities Basic Queuing Theory Batch and queue Single-piece flow Inventory Implications Production Trigger Focus on Improvement Large inventories as a result of batch and queue production and WIP Products pushed onto the market as a result of forecasted demand Improvement focused on lowering cost and increasing productivity of each activity (analytical reductionism) Minimal inventories Products pulled onto the market by demand Improvement focused on lowering cost and increasing productivity of value adding activities and reducing/eliminating non-value adding activities Variability Control Buffers used to control variability Use of coordination among internal operations as well as supply chain management to reduce variability Focus of Control Cost and time of activities Cost, time and value of value adding and non-value adding activities 11

21 Figure 2.6: Delineation of Activities 2.2 Fundamental Lean Principles The work of Lauri Koskela has yielded the following list of principles believed to be crucial to lean production: Meeting the Requirements of the Customer. Attention must be paid to quality as defined by the requirements of the customer. The success of production hinges on the satisfaction of the customer. A practical approach to this is to define the customers for each stage and analyze their requirements. Reducing Non-Value Adding Activities. Non-value adding activities generally result from one of three sources: the structure of the production system, which determines the physical flow that is traversed by material and information; the manner in which the production system is controlled; and the nature of the production system such as defects, machine breakdowns and accidents. Reducing Cycle Time. Cycle time is defined as the total time required for a particular piece of material to traverse the flow. Cycle time can be represented as follows: Cycle Time= Processing Time +Inspection Time +Wait Time +Move Time Research has identified the following activities that reduce cycle time: Eliminating WIP. Reducing batch sizes. Changing plant layout so that moving distances are minimized. Keeping things moving; smoothing and synchronizing flows. Reducing variability. Isolating the main value adding sequence from support work. Changing activities from sequential to parallel ordering. Solving problems caused by constraints slowing down material flow. 12

22 Reducing Variability. Variability of activity duration increases the volume of non-value adding activities. It may be shown through queuing theory that variability increases cycle time. Variability reduction is aimed at reducing both the nonconformance of products as well as duration variability during both value adding and non-value adding activities. A few strategies aimed at variability reduction are as follows: Standardization of activities by implementing standard procedures. Mistake-proofing devices (poke yoke). Increasing Flexibility. The ability of the production line to meet the demands of the marketplace and change must be increased. Research has recognized the following activities aimed at increasing output flexibility (Stalk 1990): Minimizing lot sizes to closely match demand. Reducing the difficulty of setups and changeovers. Customizing as late in the process as possible. Training a multi-skilled workforce. Increasing Transparency. The entire flow operation must be made visible and comprehensible to those involved so that mistakes can be located and solved quickly. Maintaining Continuous Improvement. The organization must continually strive to incrementally improve operations and management methods. The following methods have been classified as necessary for institutionalizing continuous improvement: Measuring and monitoring improvement. Setting stretch targets (e.g., for inventory elimination or cycle time reduction) by means of which problems can be found and solved. Giving responsibility for improvement to all employees; steady improvement from every organizational unit should be required and rewarded. Using standard procedures as hypotheses of best practices, to be constantly challenged by better ways. Linking improvement to control; improvement should be aimed at the current control constraints and problems of the process. The goal is to eliminate the root of problems rather than to cope with their effects. Simplifying by Minimizing the Number of Steps, Parts, and Linkages. Complexity produces waste as well as additional costs. When possible, the process should be streamlined through efforts such as consolidating activities; 13

23 standardizing parts, tools and materials; and minimizing the amount of control information needed. Practical approaches to simplification include the following: Shortening flows by consolidating activities. Reducing the part count of products through design changes or prefabricated parts. Standardizing parts, materials, tools, etc. Decoupling linkages. Minimizing the amount of control information needed. Focusing Control on the Complete Process. Segmented flow leads to suboptimization and should be avoided; thus, control should be focused on the entire process for optimal flow. Balancing Flow Improvement with Conversion Improvement. Flow improvement and conversion improvement are interconnected; therefore, their individual improvements should be analyzed to create balance within the process. Benchmarking. Benchmarking can provide the stimulus to achieve breakthrough improvement through radical reconfiguration of processes. James P. Womack and Robert T. Jones (1996) have identified five fundamental and sequential steps that create a conceptual outline of what they call lean thinking. A quick comparison with the ideas outlined by Koskela reveals many similarities, as the works of Womack and Jones have proven to be influential within this particular field of study. The steps are as follows: Step 1. Specify value from the standpoint of the customer: Understand the customer. Target cost. Look at the whole. Specify value by product/service. Value must be defined for each product family, along with a target cost based on the customer s perception of value. Step 2. Identify the value stream for each product family: Understanding flow is the key technique for eliminating waste (muda). Create a vision of flow. 14

24 Compete against perfection by eliminating muda. Identify value adding activities. Identify contributory non-value adding but required activities (Type I muda). Identify non-value adding activities (Type II muda). Rethink operating methods. Eliminate sources or root causes of waste in the value stream. Step 3. Make the product flow: Focus on actual object from beginning to completion and produce continuous flow. Ignore traditional boundaries (department). Apply all three of these steps at the same time. Work on the remaining non-value adding activity (Type I muda). Synchronize and align so there is little waiting time for people and machines. Match workload and capacity. Minimize input variations. Step 4. Ensure that this happens at the pull of the customer: Communicate. Apply level scheduling. Release resources for delivery just when needed. Practice JIT supply rather than JIT production. Continue to work on the remaining non-value adding activity (Type 1 muda). Step 5. Manage toward perfection: Increase transparency. Form a picture of perfection. 15