What You Can And Cannot Learn About Manufacturing From Books

I found the following reader’s question in another blog:

“I’m new to Lean and reading all I can find about it, but is there something specific I need to look out for; is there something I should know that I won’t find in the books?”

It’s been centuries since the book was the state of the art in communicating knowledge, and readers needed technical support on how to use one:

Millenials may be the last generation for which “book smart” is synonymous with educated. But books, even printed books as opposed to ebooks, are still essential to learning, and in particular to learning Lean.

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Question On Optional Components | Arvind Janarthanam

“Greetings! First of all, I am thankful to this blog. It has helped me out with my queries.

I’m working as a scheduler and we are facing sudden change in the optional parts that we supply to our customer. The reliability of the forecast we have is coming down. Most of our parts being imported is affecting our cost due to last-minute freight. Can you please suggest an approach to arrive at the minimum number of stock we could maintain against each options(based on past data) so that we strike a balance between the inventory and availability.

Arvind”

Michel Baudin‘s response:

Dear Arvind:

You tell me you are a scheduler, but many of the actions that can improve the procurement of optional parts are beyond the range of what a scheduler can decide. You are also asking a generic question, to which there is no generic, universal answer. All I can do is lay out a few possible courses of action.

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Overlapping Shifts Versus Gaps Between Shifts

The following question arrived this morning about 3-shift operations in a factory: “Is it a good idea to have both the ‘leaving’ and the ‘upcoming team’ together having the shift handover and line meeting all at once?”

In principle, having a handover in person at each work station would be valuable, but is often impractical. If, for example, a shift is behind schedule, a gap between shifts gives it an opportunity to catch up but a shift overlap doesn’t. And when the shift is on schedule, the gap can be used for maintenance. There are also logistical issues with overlapping shifts: during the overlap, your facility must accommodate the populations of both shifts at the same time. This means an oversize parking lot, crowded hallways, and a crowded shop floor.

A shift overlap for line management, on the other hand, is easier to arrange, starting as the production supervisor level, even with a gap between shifts.

How Can I Speed Up My Team’s Lean Learning?

“How can I speed up my team’s lean learning?” is a question found on the web, with no context given: we don’t know whether it is team of managers, engineers, or operators, or whether it works in manufacturing, finance, or health care… We can infer from the tone of the question that its author is a leader frustrated with the pace of a team’s progress. I will further make the assumption that the concern is not just about skills but also about principles. It’s not just about know-how but also know-why, as it is essential to address new challenges.

Then we also need to make a distinction between learning as a team and learning by team members. You hear leaders say “as a team, we have learned to change over a lathe in 7 minutes,” or “as a team, we have learned to introduce a new product on this line in 3 weeks.” If such a team replaces one of its members, it can bring the newcomer up to speed and retain the skills and the knowledge; if, on the other hand, it replaces half its members, it has to relearn. A team  is more than the collection of its members, but it builds on the expertise of its members, which means that their individual expertise also needs to be nurtured. This means that individual learning by team members also is a topic that must be addressed.

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On Reddit: “I am a Manufacturing Consultant, Ask me Anything!”

Reddit has a “subreddit” called “IamA,” where an individual posts information about himself or herself, and all members are allowed to ask questions. I gave it a try last night, posting the summary of my LinkedIn profile. The questions were more like those students ask about career choices and strategies than the more technical ones I receive through this blog or through LinkedIn.  On Reddit, you only see usernames, so I don’t know whom I have been responding to.

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Questions from Croatia about 5S

Following is a list of questions by Stjepan Sinko, from Croatia, about 5S implementation, with my answers:

  1. Are there any risks associated with the implementation of the 5S program?

    Yes. A clumsy, poorly timed 5S implementation can backfire, hurt management’s credibility with the work force, and make it more difficult to try again later.

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How do I analyze historical consumption for 13,000 items?

Supply chain consultant Hadas Gur asked the following question:

I have data of demands for 13000 SKUs (consumptions from the last 5 years). 6000 of the observations are zeros.  I can’t recognize the distribution of the data . I have tried the q-q plot to find a match to any known distribution. What can I do in this case if I want to find the reorder point? Is it ok to use the reorder point formula which is in your post “Safety Stocks : Beware of Formulas” even though the distribution is not normal?

You do not give a context. Are those SKUs components supplied to a manufacturing company or retail items on supermarket shelves? The demand patterns may be radically different. In retail, for example, the demand for milk is the sum of the quantities bought by a large number of individual consumers acting independently, and the normal distribution is a likely fit. On the other hand, if you are supplying a model-specific part to a car manufacturer, it is unlikely to fit.

Do not try to apply the same approach to all 13,000 SKUs! For example, reorder point makes no senses for the 6,000 items that have had no demand in the past 5 years. You would want to investigate whether they should still be in the catalog and, if so, they are strangers and you need to organize to make or buy them when an order arrives.

For the others, I would suggest you explore the data rather than focus on fitting a distribution, starting with a Runner/Repeater/Stranger analysis. Then, starting with runners, investigate trends and seasonal variations. For repeaters, I would investigate ways to group them into families that make sense for what you are trying to do.

Do not use only the data. In order to understand what is possible, you need to visit the warehouses or distribution centers and understand how physical distribution distribution is organized, and the people involved.

Then consider a range of approaches for different items and item families, including just-in-sequence, Kanban, two-bin, reorder point, vendor-managed inventory, consignment, etc.  Examine how these approaches would have performed with the consumption pattern of the last 5 years. You can also simulate future demand.

Is the Kanban system to ensure availability of materials or to reduce inventory?

Pranay Nikam, from VCT Consulting India, asked the following question:

“I have designed and implemented the Kanban System at various type of industries. The challenge I face now is not that of explaining people how the system is designed or how it works. But rather clearing the misconception/misunderstandings key industry people have about Kanban.

My understanding of a Kanban System is ‘A Consumption based replenishment system’ with Multiple Re-Order Point (multiple Bins) as opposed to the traditional Two Bin System. In simpler words you keep enough stock to cover for the total lead time and add a buffer for demand variation and supply failures. And keep replenishing the stock as and when you consumes. The replenishment can be through fresh production or withdrawal from Warehouses or procurement from supplier.

Prime objective of the Kanban System is material availability to enable High Mix and low volume production; ultimately to support production levelling instead of running huge batches.

However, some Lean Consultants propagate Kanban as a inventory reduction tool and nothing more than a material scheduling software that can be configured in any ERP Systems.

I would be happy be receive your comments on the two different perspectives.”

The Kanban system has many variants, discussed in Chapters 10 to 13 of Lean Logistics. All these variants, however, have the following characteristics in common:

  1. They implicitly assume the demand for an item in the immediate future to match the recent past. It is a naive forecast, but hard to beat on intervals that are negligible with respect to what Charlie Fine calls the clockspeed of the business. And the fluctuations are smoothed by leveling/heijunka.
  2. They use some form of tokens to signal demand. Whether these tokens are cards or electronic messages, they can be detached from bins and parts and processed separately, in ways that are not possible, for example, in the two-bin system.
  3. There is a fixed number of tokens in circulation for each item, which is a key control mechanism for the supply of this item.
  4. The protocols for handling these tokens provide unambiguous directions on what should be done. No human judgement call is required to decide which item to move or produce. There are variations where that is not the case, like the French Kanban, which, for this reason, I don’t consider genuine.

The Kanban system  is not just a multiple-bin system, because bins are not used as pull signals. The Kanbans are pulled from bins when you start withdrawing parts from it, which you couldn’t do if the bin itself were used as a signal. If the signals are cards, you can organize them in post-office slots or on boards, which you also couldn’t do with bins. And, of course, you can do much more with electronic signals, which does not necessarily mean you should.

Your description of Kanban omits the goal of keeping inventory as low as you can without causing shortages, and experimenting with the numbers of Kanbans in circulation to test where the limit is, which makes it a tool to drive improvement.

Kanbans work for items consumed in quantities that have small fluctuations around a mean, which means medium-volume/medium mix rather than low-volume/high mix. You use other methods for different demand patterns, like reorder point for bulk supplies, consignment for standard nuts, bolts and washers, or just-in-sequence for option-specific large items… In low-volume/high-mix production you have many items that you cannot afford to keep around and only order from your supplier when you have an order from your customer; it isn’t the way the Kanban system works.

You can do many things with ERP systems but, historically, they have been more effective in managing purchase orders with suppliers than in directing shop floor operations. If you have an ERP system with accurate, detailed data about your shop floor, you can, in principle apply any algorithm you want to produce a schedule. Most ERP systems, however, do not even have structures in their databases to model the behavior of production equipment at a sufficient level of detail, and are not capable of producing actionable schedules. They print recommendations, and the final decision on the work that is actually done is a judgement call by the supervisor, or even sometimes the operator. Within its range of applicability, the Kanban system avoids this with simple rules, by focusing on what is actually observable and controllable at the local level.

So, I suppose the answer to your question is that the Kanban system’s immediate purpose in daily operations  is to assure the availability of materials while reducing inventory, with the longer-term purpose of driving improvement. Pursuing either of these goals at the expense of the other would be easier but not helpful to the business.

Replenishment lead time in retail

Raj Govindarajan asked the following question:

Your blog on Safety Stock Formula was very fascinating. I work in a Retail company and I am trying to apply the safety stock formula to the retail environment. Is it fair to consider “Replenishment Intervals” as “Lead Time”? In other words, for example, I have a lead time of 7 days, but I order every day to the store; so should I consider demand variability for 7 days or 1 day?

As you may recall, I am advocating wariness in applying the formula. If you are ordering every day for delivery 7 days later, you are not using the reorder point logic the safety stock formula is based on. With a reorder point, you are only placing an order when your stock crosses a threshold, and the stock on hand at that time is supposed to carry you until the order is delivered.

The question you are faced with, for each item, is “How much do I need to order today to make sure I don’t run out 7 days from now?”  The elements you have to make that decision are as follow:

  1. The quantity on hand you have today. 
  2. The already ordered quantities that will be delivered in the next six days.
  3. Your sales forecast, with confidence interval, for the next seven days.

The tricky part is the sales forecast. The safety stock formula assumes a consumption rate that fluctuates around a constant mean. This may not fit your products. To check it out, you need to analyze sales history. Cell phones and artichokes are both retail products, but with different demand structures.

For your products, you need to know whether they are on a trend that is long-term compared to 7 days, and which kind of trend. In addition, is there a weekly pattern in sales? Do your products sell more, or less, on week-ends? Data mining on your sales history can give you the minimum on hand you can expect at the end of six days and the quantity you need to receive on the seventh to avoid running out.

And you have to keep in mind that these calculations are only valid in the absence of earthquakes, hurricanes, stock market crashes, wars breaking out, new product introductions, or any other event that can severs the connection between historical data and the near future.

The baton-touch approach

The following question came this morning from Diogo Cardoso:

What is baton-touch in terms of product oriented manufacturing systems? I have made a deep research about this on Science Direct and other resources but I can find nothing more than an inconclusive paragraph.

Your researched the wrong sources. You could have found your answer in Working with Machines, pp. 140-142. Baton-touch is one of three approaches used to design operator jobs in cells, the other two being the caravan/rabbit-chase and bucket-brigades. The key differences are as follows:

  • In the baton-touch method, each operator performs a fixed subset of the cell’s operations, organized in a fixed sequence. It is commonly used in cells requiring three or more operators making a narrow range of products with similar work content.
    The baton-touch

    The baton-touch

  • In the caravan or rabbit-chase method, the operators follow each other through the entire sequence of operations in the cell. It requires each operator to be skilled in all the operations of the cell, and works well with up to two operators but breaks down with three or more operators, as they queue behind the slowest member of the team.
    The caravan/rabbit chase

    The caravan/rabbit chase

  • In the bucket-brigade method, the operators are in sequence, but the scope of each operator’s tasks varies. When the last operator finishes a unit, he or she takes over the next unit from the preceding operator, who in turn takes over from his or her predecessor, and so on, until the first operator, who starts the next unit. Bucket-brigades are used with a broad mix of custom or configurable products, and work when the faster operators are always downstream from the slower ones. For details, see John Bartholdi’s article on bucket brigades.
    Bucket brigades

    Bucket brigades