Lean Organization from the Tools of the Toyota Production System Chiarini (2013)

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Perspectives in Business Culture
For further volumes:
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.
Andrea Chiarini
Lean Organization: from
the Tools of the Toyota
Production System
to Lean Office
Andrea Chiarini
Chiarini & Associates
Bologna
Italy
ISSN 2280-1464 ISSN 2280-2088 (electronic)
ISBN 978-88-470-2509-7 ISBN 978-88-470-2510-3 (eBook)
DOI 10.1007/978-88-470-2510-3
Springer Milan Heidelberg New York Dordrecht London
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For my wife and my children, Rosita,
Anna Laura, Pier Francesco and Gian
Mattia
.
Preface
This is a book about the so-called Lean Thinking derived from the Toyota Produc-
tion System. Nowadays many books and papers deal with the subject, especially
books concerning the operative tools of the Toyota Production System. So how will
this book try to bring more knowledge to its readers? The book presents a complete
journey, top-down and bottom-up, for implementing Lean inside an organization
with the scope of achieving economic and financial results. The title of this book,
From the Tools of the Toyota Production System to Lean Office, indicates that the
book intends to propose a complete pattern, starting from the strategic objectives to
the production. The pattern includes service processes such as marketing, account-
ing, design and can be applied in service industry as well.
In this way, the book presents a model developed using an inductive approach
based on multiple case studies. The author has taken into account more than 200
companies based in the European Union and Asia, many of which are clients of
Chiarini & Associates. This latter is a consulting firm that provides Lean Six Sigma
consultancy. Chiarini & Associates has managed projects for companies such as
ABB, Barilla, Bulgari, Bridgestone, Continental, Donaldson, Ducati, Ferrari, Fiat
Power Train, Praxair, Sitel, Technip, Tetrapak, Tyco, Usag Stanley, Vaillant and
many others. Projects have also been managed for public administrations. The
proposed model in this book has been compared with many practitioners’ point of
view. Besides it has been compared with papers from international peer-reviewed
journals and conferences.
The first chapter is dedicated to the historical evolution of the Toyota Production
System. The second chapter discusses the so-called seven wastes and the value-
added concept. The strategic systemHoshin Kanri is explained in the fourth chapter
as the real starting point of the Lean Organization. Hoshin Kanri is the expression of
the thoughts of senior management and sets the precise direction for the Lean ship.
The strategic objectives deployed by the means of Hoshin Kanri are matched in
the fourth chapter with the wastes found through the value stream map. After
having mapped the processes and defined the strategic objectives, an organization
can launch quick and intensive improvement projects called Kaizenworkshops. The
fifth chapter discusses how to manage these quick projects and their teams. Kaizen
vii
teams in this chapter are compared to other kinds of teams such as Six Sigma teams,
and the reader will understand why the roles and rules are very peculiar. Kaizen
teams can use several tools inherited from the Toyota Production System. The sixth
chapter takes into account the most important tools from the basic 5S, through one-
piece-flow, Kanban and SMED to TPM. After dealing with the tools of the Toyota
Production System, a case study applying some of the tools is presented. The
famous Italian motorbike manufacturer Ducati, owned by Volkswagen – Audi,
discloses how Lean tools are applied in its shop-floor through some examples.
The results achieved through Kaizen workshops can be measured day by day and
managed by the introduced visual control and management system. The seventh
chapter describes lean metrics as well as the accounting systems to measure
economic and financial improvements. Traditional accounting, activity-based cost-
ing and value stream accounting are compared in order to understand which is
better for the Lean Organization.
Last but not least the eighth chapter deals with lean office and a new tool for
mapping transactional processes, the Makigami. Lean Office is the way to reduce
wastes and consequently the lead time for processes such as marketing, engineer-
ing, accounting, quality management and supply chains as well as processes inside
public administrations.1
1 You can contact Andrea Chiarini by e-mail at: andrea.chiarini@chiarini.it
viii Preface
Contents
1 From Mass Production to the Lean Six Sigma . . . . . . . . . . . . . . . . . 1
1.1 Once Upon a Time There was Mass Production
(and Sometimes Still There Is) . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Organizational and Productive Model of Mass Production . . . 2
1.3 The Birth of the Toyota Production System . . . . . . . . . . . . . . . . . 2
1.4 The Relentless Decline of Mass Production . . . . . . . . . . . . . . . . . 3
1.5 The Recovery of the USA in the 1980s–1990s and the
Proclamation of the Toyota Production System . . . . . . . . . . . . . . 4
1.6 The American Model of Six Sigma . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Lean Six Sigma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.8 The Necessity of Applying Business Excellence Models . . . . . . . . 11
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2 The Seven Wastes of Lean Organization . . . . . . . . . . . . . . . . . . . . . 15
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Value Added and Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Classifying the Types of Waste . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3.1 The 3 MU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182.3.2 The 4 M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3.3 The Seven Relevant Wastes According to Toyota
Production System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3.4 Defectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.4 Removing Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3 Using Value Stream Mapping to Visualize Value Added . . . . . . . . . 31
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2 Managing Value Stream for Lean Organization . . . . . . . . . . . . . . 32
3.3 Compilation of VSM as-is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.4 Mapping the Future State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.5 Mapping at Process Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ix
4 Strategic Planning: Hoshin Kanri . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.2 Lean: A First Warning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.2.1 Examples of Mission in Lean . . . . . . . . . . . . . . . . . . . . . . 54
4.2.2 Examples of Value Guides in Lean . . . . . . . . . . . . . . . . . . 54
4.2.3 Examples of Vision in Lean . . . . . . . . . . . . . . . . . . . . . . . 55
5 Kaizen Workshops and How to Run Them . . . . . . . . . . . . . . . . . . . . 63
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.2 Introducing Lean Kaizen Workshops . . . . . . . . . . . . . . . . . . . . . . 63
5.2.1 Programming and Preparing the Event . . . . . . . . . . . . . . . 66
5.2.2 Choosing Team Leaders and Team Members . . . . . . . . . . 67
5.2.3 Carrying Out a Workshop . . . . . . . . . . . . . . . . . . . . . . . . 69
5.3 Gathering Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.4 Analyzing the Data Gathered and Implementing Solutions . . . . . . 73
5.5 Final Check, Results Presentation and Team Celebration . . . . . . . 78
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
6 The Main Methods of Lean Organization: Kanban, Cellular
Manufacturing, SMED and TPM . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.2 Pull Versus Push . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.3 5S Order and Cleanliness, the First Step Towards Introducing
Visual Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.3.1 Seiri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
6.3.2 Seiton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
6.3.3 Seiso . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
6.3.4 Seiketsu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
6.3.5 Shitsuke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
6.4 The Kanban System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
6.4.1 Different Types of Kanban and Application Methods . . . 90
6.4.2 Calculating the Number of Kanbans . . . . . . . . . . . . . . . . 93
6.4.3 The Kanban Operating Principle . . . . . . . . . . . . . . . . . . . 94
6.4.4 Using the “Milk-Run” . . . . . . . . . . . . . . . . . . . . . . . . . . 96
6.5 Balancing the Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
6.6 Cellular Manufacturing and One-Piece-Flow . . . . . . . . . . . . . . . 100
6.6.1 Designing Cellular Management . . . . . . . . . . . . . . . . . . . 100
6.6.2 P-Q Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
6.7 Heijunka Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
6.8 Quick Changeover and Single Minute Exchange of Die . . . . . . . 106
6.8.1 The Four Stages of SMED . . . . . . . . . . . . . . . . . . . . . . . 106
6.8.2 Identifying Internal and Outer Set-Ups and Preparation . . 107
6.8.3 Converting Internal Set-Ups to Outer Ones . . . . . . . . . . . 110
6.8.4 Improving Internal and Outer Set-Up Activities . . . . . . . . 110
x Contents
6.9 TPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
6.9.1 The TPM Campaign: First Step, 5S . . . . . . . . . . . . . . . . 112
6.9.2 Self-Maintenance: Maintenance Carried Out by Workers . 113
6.9.3 Preventive Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . 113
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
7 Lean Metric, Lean Accounting and Value Stream Accounting . . . . . 117
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
7.2 Defining Lean KPIs: Lean Metric . . . . . . . . . . . . . . . . . . . . . . . 118
7.3 Measuring Cell/Process Performance Bottom-Up . . . . . . . . . . . . 120
7.4 OEE and the Six Big Equipment Losses . . . . . . . . . . . . . . . . . . 125
7.5 Other Cell/Process Key Indicators . . . . . . . . . . . . . . . . . . . . . . . 126
7.6 Strategic and Lean Organization Value Stream Indicators . . . . . . 127
7.7 Activity Based Costing versus Traditional Accounting . . . . . . . . 130
7.8 Lean Accounting and Value Stream Accounting . . . . . . . . . . . . . 137
7.9 Value Stream Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
8 Lean Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
8.2 What is Lean Office? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
8.3 Waste in Transactional Processes . . . . . . . . . . . . . . . . . . . . . . . . 143
8.4 Mapping Service Flow and Identifying Waste . . . . . . . . . . . . . . . 143
8.5 Indicators and Metrics for Lean Office . . . . . . . . . . . . . . . . . . . . 150
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
9 Management of a Kaizen Workshop Carried Out in Ducati
Motor Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
9.1 Workshop Preparation and Targets . . . . . . . . . . . . . . . . . . . . . . . 155
9.2 Code and Sales Figures Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 156
9.3 Current State Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
9.4 Definition of Inventories Between Processes . . . . . . . . . . . . . . . . 158
9.5 Introducing Kanban in the Driveshaft Process . . . . . . . . . . . . . . . 159
9.6 Managing Camshaft Production . . . . . . . . . . . . . . . . . . . . . . . . . 159
9.7 Calculating the Amount of Kanbans . . . . . . . . . . . . . . . . . . . . . . 162
9.8 WIP Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
9.9 Inspection and Workshop Results Presentation . . . . . . . . . . . . . . . 164
Contents xi
.
Chapter 1
From Mass Production to the Lean Six Sigma
A warrior of light who trusts too much in his intelligence will
end up underestimating the power of his opponent
By Paulo Coelho
1.1 Once Upon a Time There was Mass Production(and Sometimes Still There Is)
In the first years of the twentieth century the famous entrepreneur Henry Ford used
to say, half serious, half joking, that “Any customer can have a car painted any color
that he wants so long as it is black” and “What doesn’t exist cannot break”
(referring to a car’s optional features). Considering the interruption of the markets
development due to the two world wars, in 1960s and 1970s companies all over the
world found themselves doing business in a sort of calm sea where the route wasn’t
difficult to choose. The consumers requested products they did not have which
could significantly improve their daily lives and for marketing managers it was
relatively simple to satisfy their needs. The post-war generation, for example, used
the moped as means of transport, but for obvious reasons desired a car. As soon as
they managed to buy one, it became a Sunday morning ritual to tinker away in ones
garage, trying to repair and maintain the product, as it was replacing the broken
vacuum valve of the black and white television. The washing machine, the televi-
sion, the fridge, the dishwasher and other objects that we now take for granted,
often remained dreams for years for families in the post-war era. As soon as the
financial status allowed it the purchase was automatic, without many demands
regarding the quality of the product, from those few companies whose main goal
was satisfying a rather large local request. In fact, only very few companies tried
expanding to foreign markets due to trade protection and communication barriers.
Today every company uses the Internet to complete transactions, but to those times
even fax did not yet exist. So the consumer bought a product/service that he had
never had before, having to choose between a few competing companies; and this
product will have definitely changed his lifestyle. In this context it was quite
A. Chiarini, Lean Organization: from the Tools of the Toyota Production System
to Lean Office, Perspectives in Business Culture 3,
DOI 10.1007/978-88-470-2510-3_1,# Springer-Verlag Italia 2013
1
difficult to obtain personalized products, long-term guarantee, immediate delivery
and other services that nowadays are ever-present. The production for this market
was concentrated on products that scarcely varied, produced by few companies that
relied on little competition and relatively low-priced raw materials.
So was it really necessary to strive for excellence through quality and by
reducing internal waste?
1.2 The Organizational and Productive Model of Mass
Production
Between the nineteenth and the twentieth century F.W. Taylor introduced the so-
called Scientific Management, reaching the conclusion that the best establishments
had to rigidly and scientifically specialize their organizational roles. If the market
demanded an increasing quantity of relatively simple products with a constant rhythm,
an “organizational clock”, which was synchronized with this market, was needed.
Rather than having a work forces organized in teams to improve products and
processes, it was favored having work forces concentrating on producing at the right
speed and with the correct equipment, leaving the task of finding and removing
products not up to standard at the end of the chain to quality inspectors. Scientific
Management is the organizational model used by Ford to produce the famous model
“T”, introducing the assembly line. Compared to taylorism, Ford even believed that
the worker had to be completely subdued by themechanism of the chain: the assembly
line set the rhythm of production, or, as we nowadays call it, takt time (cycle time) and
the worker had to complywithout questioning. A perfect model, with an uninterrupted
lead-time would certainly not lead to warehouses with a low inventory turnover. And
what about employee management? Concepts like Team Building, Job Enrichment &
Rotation and self-accountability were not applied; in fact, workers often felt alienated
in this system, an aspect discussed in Charlie Chaplin’s famous film “Modern Times”;
even the quality of products was not exactly up to Six Sigma standards, since these
were checked by production line inspectors.
To be fair, this organization allowed a considerable reduction of the car’s unit
price, and Ford started selling the cars to the workers, who in the meantime saw
their purchasing power rise thanks to the parallel increase of the gross domestic
product.
1.3 The Birth of the Toyota Production System
Some authors describe the dawn of the Japanese industrial system almost like a
philosophical myth; a concoction of elements connected to the rigid social system,
the comparison between Shinto and the western philosophy of Cartesian origin,
2 1 From Mass Production to the Lean Six Sigma
lead to the success we now know. Historical anecdotes aside, analyzing the situa-
tion with the eye of a macro-economist, it’s certain that Japan, in the mass
production glory years, emerged defeated from the second-world war and had to
fight obstacles that western, especially American, industries did not have. It’s
common knowledge that post world war Japan had:
• Higher raw material costs: since Japan has few natural resources, these have to
be imported.
• Rigid salary ranges due to a stifling union system imposed by the victorious
Americans.
• A smaller internal demand compared to western countries, considering the
difficulties induced by economic crisis after the defeat in the Second World War.
Attracted by mass production, which kept the western industries at high speed,
the inventors of Lean Manufacturing attempted to compete with similar products
obtaining poor results. Mass production followed the very simple equation of
“quality equal to costs”, and since the Japanese had the initial disadvantage of
elevated costs, there was high risk of producing products of poorer quality than
the western competitors. Someone may still remembers the Japanese products
of the 1960s, like cameras of very poor quality quite similar to the Chinese products
of the late 1980s. There are many myths regarding the famous journey in 1950 of
the Toyota heir, Eiji Toyoda, and his production manager, Taiichi Ohno, to Ford
to understand how they could apply mass production methods to Toyota. Ohno
understood immediately that it would not have been a success due to the aforemen-
tioned problems; instead, they would have to thoroughly modify the cost structure
to obtain a necessary cost reduction. Meanwhile, the situation on the international
markets was rapidly changing, moving away from the organizational structures of
mass production.
1.4 The Relentless Decline of Mass Production
In the first years of the 1970s, the GDP of the industrialized western nations was
still increasing steadily, and with them, the purchasing power of the consumers.
It has been sociologically proven that an increase of purchasing power is
accompanied by an inevitable tendency of the consumer to demand higher quality,
seen as reliability, personalized products and other bonuses. Thus, the consumer
starts to complicate the lives of marketing managers and their companies by
demanding diverse products and thus causing an explosion of production codes.
American and European reached mass product saturation at the end of the 1960s,
which reached its peak in 1971 with the American economic crisis and Nixon
stepping back on the 1944 Bretton Woods system that determined the convertibility
of dollars to gold.
Parallel to this important historical event, the Arab-Israeli Yom Kippur war in
1973 caused increase of petroleum and natural gas prices of 70%. These political
1.4 The Relentless Decline of Mass Production 3
and economical events clawed atthe heart of Ford concept: the concept of unlimited
development based on the limited and unstable resource that is petroleum.
Thus the Japanese industry and especially Toyota in the 1970s and 1980s had a
head start in competing in this new big economic scene, since they had already
developed strategies and methods of eliminating internal waste (the famousMuda),
improving the quality of products and, especially, reacting to new clients that
demanded personalized products at competitive prices.
By the end of the 1970s Japan was the nation to follow for its industrial and
economic structure, and many economists were certain that the American decline
was inevitable in the next decades.
The western answer to this new situation, it must be said, was not particularly
speedy. European countries, for example, tended towards protectionism, leading
to a general delay in development, and some organizations were still trailing
behind in the new millennium. Differently, the USA initially responded with a
reorganization policy based on cutting back directly on production costs, especially
labor, and, at the same time, increasing automation. In the 1980s, aided by the
explosion of computer science in companies, the concept of Computer Integrated
Manufacturing (CIM) is introduced in the USA, making it clear that mainframe,
server, robotized cells and AGV would have replaced workmen bit by bit and led to
a workman-free factory controlled by few, specialized technicians. Thanks the best
universities in the world such as MIT, Harvard, Stanford and others, the USA tried
to respond to this new situations with the most advanced systems of planning and
control.
Software such as MRP I (Material Requirements Planning) and MRP II
(Manufacturing Resources Planning), still much used today, are developed together
with the first mainframes and servers for companies, making it possible, by using
predictive models, to partially keep up with the increase of codes and the reduction
of lots the market clamored for.
1.5 The Recovery of the USA in the 1980s–1990s and the
Proclamation of the Toyota Production System
It is important to realize that the USA responded to the crisis with a revolution of
their economical and industrial philosophy. Obviously a system that leads to
excellence like Lean Manufacturing, Six Sigma or for instance TQM (Total Quality
Management) has to start with significant commitment by the leadership. The USA
started off with a liberal breeze brought by president Ronald Reagan from 1981 to
1989, who personally handed over the Malcom Baldridge prize to companies of
excellence; this was the sign of a new era. Even Hollywood declared that the era of
finance and of those that considered companies mere short-term profit centers had
come to an end, and that now it was time for engineers concentrated on processes;
Oliver Stone, the American film director, in the film Wall Street denounced greed
4 1 From Mass Production to the Lean Six Sigma
(greed is good) and the absence of rules in a world of bankers that would have soon
been surpassed by technicians and managers that believed in production. In many
ways a similar scenario to the last economic crisis that was set off by large banks
going bankrupt as well as the US and European public debts is underpinned on the
not long-view of short term profits.
Still in the 1980s, Deming wrote one of the best books on management of the last
two decades, Out of the Crisis: a symbolic title that warned and advised the whole
industrial world what really needed to be done to survive in the competitive
struggle. A shame, really, that the last crisis didn’t produce similar masterpieces.
The American economy took off and the global competition became more intense.
In the 1980s the strategies necessary to compete increased in number:
• Understanding the customers demand (Voice of the customer);
• Understanding when to introduce new products/services (Time to market);
• The safety and reliability of a product;
• The mix of codes and subsequent reduction of lots in sale and supply;
• On-time delivery;
• Reduction of production costs;
• The total cost of a product or service.
As well as the stress on automation and on computerized systems, the USA also
started importing Lean Manufacturing principles. Womack and Jones of MIT
published a book in 1989 called The Machine That Changed the World, introducing
the concept of Lean Thinking in contrast with Mass production. This book, together
with the sequel Lean Thinking, finally proclaimed the success of Lean in the whole
world. Lean Manufacturing or Toyota Production System, of pure Japanese origin,
became a necessity to compete with another important system that was developed
in the early 1990s branching from TQM as many authors suggested: Six Sigma.
1.6 The American Model of Six Sigma
From 1985 to the early 1990s Motorola experimented with the famous Six Sigma
pattern first on productive processes, subsequently on all company processes,
saving 1.5 billion dollars in 5 years and winning the Malcom Baldrige award. Six
Sigma spread to most of the western world in the early years of the new millennium,
thanks to Motorola and especially General Electrics (GE) and its famous CEO Jack
Welch. GE gave Six Sigma that strategic dimension that made it to system of
excellence; removing the image it had of being a set of tools to improve quality. In
the year 2000 Harry and Schroeder published a famous book on Six Sigma, giving
to this management system a precise route that starts with strategies, uses teams
with certified specialization and improvement programs organized in five steps
(Define-Measure-Analyze-Improve-Control or DMAIC) and, especially, delivers
results in the form of saving.
1.6 The American Model of Six Sigma 5
The main principle is reducing the variability of processes. Every process, be it
productive or of service, ideally has a target. A polished steel pole must have a
certain diameter, like taking care of a financial case must not take more than a
certain amount of days. Unfortunately, processes are by nature subject to variability
and so results drift away from target. Within the process there are certain traits
critical to reaching the target that need to remain within a certain programmed
toleration zone. For example, to avoid hospital-induced infections a certain bacte-
rial load has to be present. These critical characteristics to the quality of the
product/service in Six Sigma are called Critical To Quality, or CTQ. The deviation
from the CTQs is statistically measured through the “sigma”, better known as
standard deviation. In general the bigger the number of sigma inside the range
around the target, the smaller the possibility of producing non-conformities. Which
easily translates into satisfied customers and saving in terms of Cost Of Poor
Quality (COPQ). If a process reaches a six sigma quality, this means that this
process will produce 3.4 defect products or service per million; an unexceptional
quality when talking about clothes, but an unacceptable one when discussing
airplane landings or surgery success. In Harry and Schroeder’s book it is proposed
an important table (see Table 1.1) that connects the level of sigma reached by a
company, the number of non-conformities produced and how much these defec-
tiveness affected the turnover.
The senior management is the sponsor of Six Sigma and, based on long-term
strategies, identifies a series of strategic goals linked to the quality and the service
the company needs to achieve. The achievement of these goals is structured in
improvement programs (deployment) that strive to reduce the variability of CTQs.
These Six Sigma improvement programs are carried out strictly following five
steps, knownas DMAIC.
• Define: determining the processes in need of improvement, in agreement with
the company’s strategies and CTQs of these processes; at this stage the team that
will carry out the project is assembled, the deadline and the goal in terms of
saving are defined;
• Measure: measuring the current state of CTQs and assessing the deviation from
the target;
• Analyze: determining the reason why the target is not being reached and thus
create defects and waste (Muda in Lean);
Table 1.1 Correlation among sigma level, DPMO and COPQ
Sigma level Defects per million opportunities (DPMO) Estimated cost of poor quality (COPQ)
2 308,537 Not applicable
3 66,807 25–40% of the turnover
4 6,210 (standard industry) 15–25% of the turnover
5 233 5–15% of the turnover
6 3.4 <1% of the turnover
From Harry and Schroeder (2000)
6 1 From Mass Production to the Lean Six Sigma
• Improve: launching improvement projects to remove the causes of non-
conformity and waste (Muda).
• Control: measuring the improvements, certifying the economic and financial
savings and developing a standard method to continue improvement.
During the five stages of DMAIC, the team uses the managerial and statistical
tools it deems most suitable. These methods are of TQM origin, and have been
enriched in the last years by Lean, as illustrated below.
Table 1.2 compares the classic quality tools to the phases of the DMAIC pattern.
The five steps of Six Sigma – DMAIC are carried out by a team of specialists,
structured in:
• A team leader called Black Belt;
• Members responsible of parts of the project called Green Belts.
The team receives a specific training on the quality tools and a certification ad
personam based on the ability to ensure success through the DMAIC stages. The
certification process requires a training course between 10 and 16 days long spread
over 3–4 months.
Usually the manager that certifies Black and Green Belts is known as the Master
Black Belt; this latter is a Black Belt that has proven the ability to manage
successfully numerous projects.
The certification of the financial and economical results for the senior manage-
ment is of great importance. According to the original American model, a Six
Sigma project cannot be called as such if it does not produce results, especially in
savings.
1.7 Lean Six Sigma
With the birth of Six Sigma the comparison between the two systems was taken for
granted by companies, consultants and academics. Was the Japanese Toyota sys-
tem, being more aimed towards the added value, better or worse than the American
system? The truth, as always, lies in the middle. There are still purists of both
systems, but the organizations of excellence analyzed in this book teach us that it
does depend on what improvements one strives to achieve (Table 1.3).
Six Sigma is mainly focused on problem solving; the enemy is the variation
within the processes. On the other hand, Lean concentrates more on the process
viewed as a flow. The enemy in this case, as will be illustrated in the following
chapters, is every activity without added value that creates waste. Being focused on
problem solving and the variation causes, Six Sigma prefers statistical methods,
often advanced as can be deduced from the Table 1.2. Lean concentrates on the
process mapping, on understanding the process as a whole and on the tools
described in Chap. 6 to eliminate waste. These tools almost always have
1.7 Lean Six Sigma 7
Table 1.2 Tools used in the DMAIC pattern
DMAIC Phase Steps Tools Used
D – Define phase: Define the project goals and customer
(internal and external) needs
Define customers and requirements (CTQs) Project charter
Develop problem statement, goals and benefits Process flowchart
Identify champion, process owner and team SIPOC diagram
Define resources Stakeholder analysis
Evaluate key organizational support CTQ matrix definition
Develop project plan and milestones Quality function deployment
(QFD) – Kano analysis
Develop high level process map
Define tollgate review
M – Measure phase: Measure the process to determine
current performance; quantify the problem
Define defect, opportunity, unit and metrics
Detailed process map of appropriate areas Data collection plan/example
Develop data collection plan Benchmarking
Validate the measurement system Measurement system analysis/
gage R&R
Collect the data Voice of the customer gathering
Begin developing Y ¼ f(x) relationship Cp, Cp
Determine process capability and sigma baseline
Measure tollgate review
A – Analyse phase: Analyse and determine the root cause(s)
of the defects
Define performance objectives Histogram
Identify value/non-value added process steps Pareto chart
Identify sources of variation Time series/run chart
Determine root cause(s) Scatter plot
Determine vital few x’s, Y ¼ f(x) relationship Regression analysis
Cause and effect/fishbone
diagram
5 whys
Process map review and
analysis
Statistical analysis
Hypothesis testing (continuous
and discrete)
Non-normal data analysis
Analyse tollgate review
I – Improve phase: Improve the process by eliminating
defects
Perform design of experiments Brainstorming
Develop potential solutions Mistake proofing
Define operating tolerances of potential system Design of experiments
Assess failure modes of potential solutions Failure modes and effects
analysis – FMEA
Validate potential improvement by pilot studies Simulation software
(continued)
8 1 From Mass Production to the Lean Six Sigma
manufacturing origins. Table 1.4 sums up what has been said about the differences
between the two systems.
The American consultant George was the first to analyze how to merge the two
systems, in particular by adding the Lean tools and technique to the strict DMAIC
pattern and in the Black and Green Belts’ training . The famous George’s phrase
“Lean means speed” brought to the understanding that with Lean, problems can be
solved quickly without following strict processes that can take months. In fact,
George wanted to attract attention to the reduction of the lead-time of the process
flow. The complexity of using certain statistical methods and the failure in some
organizations of Six Sigma programs led to criticism. Besides some authors
claimed that Six Sigma is a hierarchical and mechanistic management systems
where employees are more headed by extrinsic factors like savings instead of
intrinsic ones such as personal growth and potentiality. Lean that derives from
the Japanese culture has brought into Six Sigma new tools and new principles of
employee management as Ohno and Shingo used to write in their books on Toyota
Production System.
Table 1.2 (continued)
DMAIC Phase Steps Tools Used
Correct/re-evaluate potential solution
Improve tollgate review
C – Control phase: Control future process performance
Define and validate monitoring and control system Process sigma calculation,
Cp – Cpk
Develop standards and procedures Control charts (variable and
attribute)
Implement statistical process control Cost savings calculations
Determine process capability Control plan
Develop transfer plan, handoff to process owner
Verify benefits, cost savings/avoidance, profit growth
Close project, finalize documentation
Communicate to business, celebrate
Control tollgate review
Table 1.3 Six Sigma versus lean organization
Six sigma Lean organization
Focus Variation reduction Waste reduction
Improvement projects DMAIC pattern Value stream mapping
Use of certified Black and Green
Belts
Kaizen week, quick and operative
Certified savings Improvement and maximum
involvement first of all
Tools and techniques Quality and problemsolving tools,
project management
Toyota production system tools
1.7 Lean Six Sigma 9
Nowadays, the organization excellence approaches Lean Six Sigma following
the route described in the next chapters. After having defined strategic objectives
and mapped out the processes, the organization uses swift Lean projects to reduce
waste combined with projects of various lengths to explore the causes of variability.
A Kaizen week dedicated to the 5S tool (a tool used to tidy and arrange work-
spaces) could be even voluntary and doesn’t need a strict, mechanic DMAIC
pattern. While the introduction of preventive maintenance according to TPM
Table 1.4 Different kind of improvement teams inside Lean Six Sigma
Improvement
objective Team Team management Features of the project
Variation reduction Six Sigma or
long-term project
Use of teams with
managerial and
statistical skills.
Projects based on
DMAIC pattern or
PDCA. Projects last
from 3 to 18 months
Definition of the critical
characteristics of the
processes (e.g.
waiting time, parts-
per million of
defects) derived from
strategic objectives
inside Business Plan.
For each critical
characteristics should
be defined a target
and an expected cost/
saving
Waste reduction Workshop Kaizen or
Kaizen event
Use of teams with skills
on Lean tools and
techniques (5 S,
SMED, Group
Technology, Celle ad
U, Poka-Yoke,
Kanban, TPM). Less
use of statistical tool.
Quick and full-
immersion
Workshop Kaizen.
They last on average
1 week or less and
can be planned
according to the
company strategies
The team has to reach
first of all
improvements.
Targets are less
important than
improvements. By
and large kaizen
events lead to
achieve strategic
objectives
Rapid solution of
problems/wastes
Rapid workshop
Kaizen
Quick and very agile
teams. 2–3
participants with
general knowledge
on Lean and quality
tools, but skilled on
problem solving. The
workshop are not
programmed; the
“trigger” is an arisen
problem
The teams occur when a
problem arises.
People can also stop
the line or cell until
the problem is
worked out. Every
day teams can
analyze the cell or
line problems using
for instance the
Asaichi – A3 tool
10 1 From Mass Production to the Lean Six Sigma
(Total Productive Maintenance) can be instead managed with the DMAIC, by using
statistical methods unknown to the Lean world. A couple of examples may help in
understanding the synergies of Lean Six Sigma.
Example 1. A manufacturing company appointed a team with the task of design-
ing a U-shaped cells based on Group Technology, a technique that tries to group
production codes that require similar production cycle within a single cell,
described in Chap. 6. It emerged that the variability of the codes was so high that
it was impossible to introduce Group Technology. A second team formed by
employees from engineering, purchase and production departments along with a
Black Belt, managed a Six Sigma project of code reduction and standardization
over 4 months. During these 4 months, the team first used QFD (Quality Function
Deployment), and subsequently DFM (Design For Manufacturing), DFA (Design
For Assembly), DFC (Design For Cost) and FMEA (Failure Modes and Effect
Analysis) methods to reduce and standardize codes. By the end of the project,
applying the new standardized products, the U cells could finally be developed.
Example 2. In an English hospital, before introducing a quick change-over in the
type of surgery performed, a Six Sigma team was confronted with the problem of
reducing hospital-induced infections. This project brought the team to gather data
for more than 6 months and subsequently analyze it with advanced statistical tools.
Table 1.4 sums up the types of projects that can run within a Six Sigma model.
Lean has, in the last few years, left the tight boundaries of production in favor of the
so-called transactional processes; these are basedmainly on the transaction of data and
information rather than the physical elaboration of products. This way,LeanOfficewas
born and applied to design, marketing, assistance, accountancy, service departments
and industries as well as public administrations. Lean had to adapt and new methods
were therefore born. Concerning this last mentioned point, it is important to underline
the massive confusion, reported directly by the companies that apply Lean, which a
few practitioners and academics originated about Lean Office. Lean Office simplifies
and quickens processes that accompany production like design, development, market-
ing to mention a few, however in design processes, for example, it must not be
confused with projects that improve the reliability and quality of the product.
Far to often projects by the means of QFD, FMEA, FTA, Robust Design, DFM,
DFA etc. are categorized as part of Lean Office. For the managers of these projects,
the right label is that of Six Sigma, or even better, Design For Six Sigma (DFSS), a
system studied for the design of the product and process, though it is advisable to
consult books on this precise subject.
1.8 The Necessity of Applying Business Excellence Models
From the analysis of the previous sections an increasing application of Business
Excellence models based purely on Lean Manufacturing or Lean Six Sigma
emerges. Indeed the typical market conditions of the 1990s were confirmed in the
first decades of the new millennium, with a few new important elements such as:
1.8 The Necessity of Applying Business Excellence Models 11
• The continuous growth of the far-eastern economies, especially the Chinese,
Indian, Vietnamese and South-Korean, despite the recession or stagnation in
other more developed countries;
• The expansion of the European Union to new partners;
• The increase of competition based on less tangible assets such as internet;
• A more volatile and instable demand;
• Western consumers paying more attention to sustainable products, connected to
companies that respect the environment, do not exploit third-world countries and
respect general business ethics; this policy is also supported by the US adminis-
tration and numerous European leaders.
When Toyota confirmed overtaking, causing great damage to General Motors,
which was on the brink of going bankrupt, China graduated more engineers than
Europe would have with the same population, and with the current trend, might
even overtake the USA. The difference is that, according to the economist Freeman,
if the rules of international trade do not change, allowing China and other countries
to defeat the so-called “social dumping”, this highly specialized work force will
cost less than a quarter of the price of the same work force of the West; thus
overturning the macro economical theories developed by David Ricardo that
sustain that countries with a lower-priced workforce tend to specialize in labor-
intensive activities.
Leaving the possible future of the West to macroeconomists, it’s clear that:
• The West will, inevitably, have to decrease the portion of GDP made up of
manufacturing; countries like the UK have far-back increased the service and
trade portions of their GDP;
• The western manufacturing industry will have the opportunity/challenge to work
with an ever-growing “supply chain”, delocalized and ever-easier to communi-
cate with thanks to modern electrical technology;
• Many European companies have a head start in relation to newly industrialized
countries, based on product and process innovation that still make them leaders;
• Within a few years, countries based on mass production or fordism will startevolving towards models of excellence ever more swiftly;
• Business in the West will continue to follow environmental rules, sustainability
and business ethics, especially following climate change and the ethical and
financial scams of the first decade of the third millennium.
Adopting models of excellence in our companies, even small or medium-sized,
will certainly lead to a decrease in costs and a performance improvement of the
product/process, helping us stay in the competitive struggle in the future. European
companies that have already started on this journey and have thus contributed to the
EU overtaking, in GDP increase, the USA and Japan, confirm this.
Undoubtedly, Lean Manufacturing or other management systems are a necessity
for the future; but which is the best way to apply one of these systems and obtain
results?
12 1 From Mass Production to the Lean Six Sigma
The next chapters will outline the journey to embark, starting off at the definition
of waste and reaching the accountancy methods needed to measure the final results.
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George, M.L.: Lean Six Sigma for Service. McGraw Hill, New York (2003)
George, M.L.: Lean Six Sigma. McGraw Hill, New York (2002)
Harry, M.J., Schroeder, R.: Six Sigma: The Breakthrough Management Strategy Revolutionizing
the World’s Top Corporations. Doubleday, New York (2000)
Harry, M., Mann, P.S., De Hodgins, O.C., Hulbert, R.L.: The Practitioner’s Guide to Statistics and
Lean Six Sigma for Process Improvements. Wiley, Hoboken (2010)
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Liker, J.K., Meier, D.: The Toyota Way. McGraw Hill, New York (2006)
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(1967)
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Waldner, J.B.: CIM, Principles of Computer-Integrated Manufacturing. Wiley, Hoboken (1992)
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(1989)
Bibliography 13
Chapter 2
The Seven Wastes of Lean Organization
All life is problem solving
By Karl Popper
2.1 Introduction
The main concept underlying not only Lean Organization but in general every
system for Business Excellence is the complete elimination of waste. Lean seeks to
“flush out” and fight waste in every process: from marketing to production pro-
cesses, from administrative processes to strategic ones. Of course, for traditional
manufacturing companies the most important waste is hidden in the production
processes, but the waste produced by other processes must not be forgotten because
this is often the primary cause of waste in production. Manufacturing is frequently
confronted with unnecessary operations caused by the excessive variability of the
components induced by design, or by excessive inventories due to wrong purchas-
ing contracts.
To understand exactly what waste is, it is necessary to start focusing on the
concept of value added. The following examples illustrate how the product or
service can gain value added from activities inside processes.
Examples. A quotation requested by a customer gains value when the supplier
meets all the requirements expressed and unexpressed by the customer. The quota-
tion that becomes an order is scheduled into management software, creating a little
more value, the assembly line create even more value and so on until the invoice is
sent to the customer and the full amount is paid.
Similarly, in a hospital, an internal department may request an analysis by the
laboratory; the request is loaded into software and scheduled, the analysis is
performed and a report is issued, creating value added for the department and the
patient.
A. Chiarini, Lean Organization: from the Tools of the Toyota Production System
to Lean Office, Perspectives in Business Culture 3,
DOI 10.1007/978-88-470-2510-3_2,# Springer-Verlag Italia 2013
15
If the production order in the first example is loaded incorrectly or the laboratory
report in the second example contains redundant data, thus spending more time and
resources, waste is created.
Waste is not only related to often clearly visible mistakes or errors, but also to
practices and established procedures that no one would ever think to change.
Consider the next two examples.
Examples. A manufacturing company managed to reduce the lead-time of a
product by 10% by simply replacing a screw with a weld spot. Tightening the
screw had to be done manually and that meant that products had to be moved to a
different production area, whereas the welder could be installed on the same line.
In a university the transfer of a student from one course to another required the
signature of three lecturers, in addition to the Dean’s, when in fact only one
signature was needed, thus increasing the length of the procedure by over 15 days.
Yet in both cases the process had always had these activities, and no one had
ever thought that these activities were non- value-added. Identifying waste is not
that easy, as will be explained in the following chapters, and processes have to be
analyzed with methods such as value stream mapping, spaghetti charts, makigami
and others. In general, moving towards excellence means getting used to continu-
ously asking oneself:
Can we do it better?
2.2 Value Added and Waste
Before trying to understand the main causes of waste inside organizations, the con-
cepts of value added, process and activity/operation need to be clear. A process is:
A sequence of activities used to manage one or more functions of the organization.
The process includes managing staff, machines, materials and methods. The
process may be internal and/or coincide with a function (e.g. the process of
purchasing) or, more often, can be cross-functional (e.g. the process of design
and development of a product/service).
The activity lies at the core of the process, for it is:
A single operation carried out within the process.
By this definition an activity can be performed either manually or with
machines. Without complicating matters more than necessary, it can be defined
as a value-added activity when:
It provides a higher value output than input.
Where value means value that is recognized by the customer. After having
processed the raw materials into semi-finished goods that need to be stored in a
warehouse, a good inspector will allocate a higher cost to the product, but can the
16 2 The Seven Wastes of Lean Organization
inspector be sure that the amount of costs will correspond to value for the customer?
In Lean Organization the definition of value added is slightly more precise; value
added must be created:
At the lowest cost possible,maximizing the value the customer recognizes to that particular
output.
Finally, waste can be defined as:
Every activity that adds costs but non-value-added for the customer.
Every organization, be it public or private, is not immune to waste; the following
generic examples illustrate the waste created every day.
Generic Examples of Waste. Management
“The monthly scheduling is incorrect, now we will be at least 10 days behind
schedule.”
“These orders for the suppliers have been awaiting shipment for almost a week;
they will pile up with the new ones.”
Production/implementation of service
“The nurses of your department are not busy; I will use them this afternoon in my
office.”
“I really do not know where to put these documents; I will leave them here while
I decide where to place them.”
“These files have been waiting to be saved on the server for over a month now.”
Inspection
“We cannot afford to make mistakes here; we should employ another inspector
to be sure everything is under control.”
Machines/equipment
“Unfortunately we will be interrupting activities for one day due to unexpected
maintenance.”
“This machine is too slow, move everything over to the other one.”
The aforementioned examples illustrate how certain wastes end up being
tolerated and even become part of the daily routine, until someone decides to
introduce a little Copernican revolution by asking “Why?”
Lean Organization means getting used to asking oneself repeatedly why new or old
activities are performed in a certain way, even after they have been thoroughly modified.
It must be noted how these examples can be applied to both the manufacturing
and the service industry: many traditional manufacturing concepts can, in fact, be
easily transferred to service industries.
2.3 Classifying the Types of Waste
Waste is classified in different ways, in accordance with the cultural and historical
approach used. These are a few examples of the ways in which waste is classified
within organizational processes according to the:
2.3 Classifying the Types of Waste 17
 3 “MU” (traditional Japanese approach);
 4 M or 5 M (traditional Japanese TQM approach);
 Seven wastes (Japanese approach adapted by the USA);
 Cost of poor quality (American TQM approach).
2.3.1 The 3 MU
Lean Organization is a widespread applied system for Business Excellence and it
has been, for many years now, applied all over the world. Regarding waste, many
organizations use the Japanese term Muda, although Muda in Japanese has a much
more restricted definition. Lean first and foremost strives to obtain a perfect balance
between capacity and workload. The right amount of workers, materials and
machines to produce, and the right amount of products as requested by customers,
dispatched at the right time. More specifically, the Japanese define:
 Muda ¼ more capacity than workload (real waste);
 Mura ¼ capacity that swings around the fixed target (the waste here being that it
is not steady);
 Muri ¼ more workload than capacity (workers and machines too busy).
An example might help explain these definitions.
Example. A worker on an assembly line has to assembly 60 products using a
machine that allows him or her to work on 20 products at the same time. Muda, as in
waste, would mean assembling the products in groups of 10, thus 6 different cycles.
Mura would mean assembling the products in 2 groups of 20 and 2 groups of 10.
Muri would be asking the poor worker to complete production in 2 cycles of 30,
thus exceeding the worker’s abilities. The ideal situation would obviously be to
divide the products in 3 groups of 20 each.
In the following chapter the word Muda will always be used to generally indicate
a waste inside a process.
2.3.2 The 4 M
The 4 M are related to the “fishbone” or cause and effect diagram invented by
Ishikawa in the 1950s. The different types of waste are divided according to their
origin: M ¼ Man, M ¼ Material, M ¼ Machine and M ¼ Method of work.
The 4 M diagram often varies: frequently it is called 5 M where the fifth
component of “mother nature” (temperature, humidity etc.) is added. The following
diagram may help to clarify the division of waste according to 4 M (Fig. 2.1).
18 2 The Seven Wastes of Lean Organization
2.3.3 The Seven Relevant Wastes According to Toyota
Production System
When talking about Lean, this method of classification is surely the most famous
and common because it was developed directly by Toyota. In fact, this method
helps staff find the root causes of waste by analyzing the flow of the production or
service implementation process. The seven relevant types of waste are:
 Overproduction or asynchrony – producing too much, too early or too late to
meet the customer’s demand;
 Inventory – raw material, work in process (WIP) and finished products stored;
 Motion – unnecessary movement of the body;
 Defectiveness – non-conforming products and services in general;
 Transportation – unnecessary movement of products between processes;
 Overprocessing – processing beyond what the customer requires;
 Waiting – having to wait before commencing the next activity.
MATERIAL,
Kind of waste:
- nonconforming 
raw material and 
semi-finished 
product; 
- scrap, rework of 
material;
- inventory;
- transportation
MAN, 
Kind of waste:
- walking; 
- waiting time;
- seeking time;
- body movement
WASTE
METHOD, 
Kind of waste:
- each wrong method 
that introduces waste 
(e.g. wrong scheduling, 
wrong inventory 
management, wrong 
instructions on the 
machine, etc.)
- set-up;
- lotti economici
MACHINE,
Kind of waste:
- breakdowns;
- set up and 
adjustments;
- small stops;
- reduced speed;
- start-up rejects;
- production non -
conformities
Fig. 2.1 Lean wastes and the 4M
2.3 Classifying the Types of Waste 19
2.3.3.1 Overproduction or Asynchrony
Overproduction is the biggest problem our manufacturing and service industries
have to fight; overproducing means, quite simply, producing an amount of products
that exceeds the demand too soon or too fast. To begin, a very simple consideration,
typical in the manufacturing industry, can be taken into account:
Overproducing means producing when there is no customer order.
Many managers think that, really, all those products stored in the warehouses
will eventually be bought, following the forecasts developed, for example, by an
MRP. But can the company be sure that these orders will arrive? In the meantime,
money has been spent and room taken up, without even mentioning the possibilities
of obsolescence, theft, damage and so on. Overproducing leads to many negative
consequences, among which are:
 Increase in inventories (second waste);
 The production process slowing down;
 Reduction of planning flexibility;
 Increase of indirect cost such as transport, inspections, and so on.
The reasons for overproduction are often related to:
 Production of oversized economical lots;
 Producing before/after the demand;
 Low speed of setups;
 Creating inventories to make up for defectiveness;
 Unnecessary staff in a process;
 Too many or too fast machines.
The staff can use a simple checklist like the one in Table 2.1 to analyze the
activity flow and estimate overproduction. This checklist was developed for a
Table 2.1 A typical checklist to evaluate excessive production
Overproduction assessment
Process: Auditor: Date
# Description of waste Yes No Waste evaluationa Cause
1 A production control is implemented
2 Production system is balanced
3 Production is synchronized according to schedule
4 Defects within the processes
5 Manual assistance is needed
6 Adequate machine capacity
7 FIFO is applied
Total
a0 ¼ evidentuncontrolled waste; 1 ¼ evident waste, no improvements; 2 ¼ reduced waste,
improvements ongoing; 3 ¼ reduced waste, continuous workshops, positive performance
indicators; 5 ¼ waste eliminated, process stabilized, positive indicators for at least 6 months
20 2 The Seven Wastes of Lean Organization
specific company, thus the criteria are not exhaustive and should be modified
according to the type of organization.
It is interesting to point out that in the evaluation system, the organization
pointedly did not include four points, so as to decisively separate a category
managed averagely from a best practice performance.
Basically, overproduction can be eliminated by balancing capacity and work-
load. Some Lean tools described in Chap. 6 can be used:
 SMED;
 Production leveling or Heijunka;
 One-piece flow cells.
Overproduction is also present in the service industry and public administration.
This might seem unlikely because there has been a great deal of talk about produc-
tivity increase and public employment over the past few years, but low productivity
and overproduction can cohabit quite peacefully. How often do customers complain
about long waiting lists and queues? Among the many obstacles there will probably
be unnecessary parts of processes as well as balancing problems.
Example of Overproduction in Service Industry. A hospital department sys-
tematically receives medical reports late with diagnostic processes that have been
completed but were never requested.
In a local administration department a document may have to wait days to be
signed by a director, even though a signature is not legally necessary and was never
requested by anyone. This slows down the entire process.
2.3.3.2 Inventory
Inventory is the typical waste that, in manufacturing, is linked to overproducing.
Inventory is any product or raw material that has been stored within or outside the
organization for a certain period of time.
Stock can thus be made up of raw material, semi-finished products or finished
products; if they represent products waiting to be processed they become WIP. In
the service industry the concepts of WIP and stock can also be applied; a pharmacy
department inside a hospital will probably be more familiar with these concepts, but
an office inside a city council that offers several types of permits and licenses may
not immediately pinpoint WIP in its business. In service, as in manufacturing, WIP
could be the amount of emails sent by customers/citizens that need to be answered
by the office, rather than the requests the department has to evaluate, or the number
of patients awaiting chemotherapy. The best way to discover where this waste lurks
is to look where products tend to accumulate, and then ask oneself why so much
stock piles up. The following are among the most frequent causes:
 Long changeover times;
 Producing big “economic” lots (Shish-Kabob);
2.3 Classifying the Types of Waste 21
 Early production;
 Bottlenecks in the production/service implementation flow;
 Parts of the process that create are inefficient or create defects;
 Processes at the beginning are quicker than those nearer to the end;
 Accepting that excessive inventory cannot be avoided because it means to
immediately deliver to the customers.
This last cause is very important when attempting to install a Copernican
revolution within the organization; the staff needs to realize and believe that
excessive inventory can be eliminated.
Excessive inventory hides problems, it does not solve them.
The paradox for, thankfully very few, organizations is that excessive inventory
can help improve assets and thus improve funding by banks. Although this might
have been the case in the first years of the new millennium, but now, after the last
financial crisis, external investors will surely understand what excessive stock
really means. The traditional Lean methods to remove excessive inventory are:
 Better balancing activities;
 U-cells, group technology;
 Quick changeover operations;
 Pull production by using Kanban.
Staff may use a checklist like the one illustrated in Table 2.2 to analyze activity
flow and measure stock. This checklist was developed for a specific company, thus
the criteria are not exhaustive and should be modified according to the type of
organization.
The third point of the checklist also implies safety at work and performance that
integrates every system for Business Excellence.
Table 2.2 A typical checklist to evaluate inventory
Inventory assessment checklist
Process: Auditor: Date
# Description of waste Yes No Waste evaluationa Cause
1 Lots on shelves or on floor
2 Shelves and stock on the floor take up room
3 Product stacks block staff and machine access
4 WIP among process activities
5 WIP among workers’ activities
6 How easy is visualizing WIP quantity?
Total
a0 ¼ evident uncontrolled waste; 1 ¼ evident waste, no improvements; 2 ¼ reduced waste,
improvements ongoing; 3 ¼ reduced waste, continuous workshops, positive performance
indicators; 5 ¼ waste eliminated, process stabilized, positive indicators for at least 6 months
22 2 The Seven Wastes of Lean Organization
2.3.3.3 Motion
Wasting time may also refer to the movements of workers. When observing
production or service implementation many activities without value added can be
noticed: workers looking for tools that are not in their workplace, employees that
need to move to be able to load data onto software, workers moved from one
department to another to stand in for lack of qualified staff, and so on. Among the
causes are:
 Poor layout design;
 Workers with lack of skills and/or poor training;
 Poor staff involvement;
 Increase in staff or work hours;
 Lack of order and cleanliness;
 Activities performed in isolated areas.
To remove unnecessary employee movements the following changes need to be
made:
 Gradually move towards production flow;
 Improve workers’ skills and/or training;
 Increase awareness concerning movements;
 Set in order workplace (5S);
 Design U-shaped cells;
 Review instructions and procedures.
Table 2.3 is an example of waste type assessment.
Table 2.3 Typical checklist to assess waste due to motions
Workers’ movements assessment checklist
Process: Auditor: Date
# Description of waste Yes No Waste evaluationa Cause
1 How far the worker walks
2 Does the worker turn around?
3 Worker’s sideward movements
4 Does the worker have to bend over?
5 Left of right hand not being used
6 Setups that require a lot of movement
7 Repeated movements that have not been standardized
8 Too fragmented operations
Total
a0 ¼ evident uncontrolled waste; 1 ¼ evident waste, no improvements; 2 ¼ reduced waste,
improvements ongoing; 3 ¼ reduced waste, continuous workshops, positive performance
indicators; 5 ¼ waste eliminated, process stabilized, positive indicators for at least 6 months
2.3 Classifying the Types of Waste 23
2.3.4 Defectiveness
The hidden factory is a well-known subject of discussion for everyone who deals
with Six Sigma, TQM, or simply with the ISO 9001 certification. Whenever
products or services do not satisfy requirements set by customers or by the organi-
zation itself, a non-conformity is generated, with its related Costs Of Poor Quality
(COPQ), classified as following:
1. Prevention and appraisal costs;
2. Internal and external defectiveness.
Therefore the hidden factory is the factory where people rework product/services
and redo activities. To reduce the aforementioned costs, extra focus must be
concentrated on prevention investments, to which the investment costs of managing
Kaizen Workshops (discussed in the fifth chapter) mustbe added. Table 2.4 lists
most of the items connected to the aforementioned categories.
The COPQ are divided in internal and external costs, depending on when they
are identified (internally or by a customer), but the company also has appraisal
costs, which, against common belief, are not really useful and usually hide other
problems and decrease value added. The cost of the incoming inspection of
materials from suppliers, for example, often compensates for the poor quality of
the supplier’s work. Basically, the seven types of waste described by Lean can be
found within the categories of internal defectiveness.
External Defectiveness Costs.
 Loss of customer revenue;
 Management of complaints and returned products;
 Reworking, reassembling, selecting and rechecking products from customers;
 Penalties for non-conformities;
 Legal actions;
 Management of products in warranty;
 Product recall.
The most frequent causes of defects can, once again, be grouped into the 4 M, in
other words:
 Materials and products;
 Poor working methods, poor instructions and procedures;
 Unaware and unqualified manpower;
 Inadequate machines and equipment.
Thus, eliminating these defects can be done by:
 Increasing staff awareness and training on quality and critical characteristics;
 Designing mistake proofing or poka-yoke;
 Designing machines for detecting defects (Jidoca or autonomation);
 Editing procedures and instructions;
 Preventive analysis of the possibility of defects (e.g. FMEA, FTA);
 Revising control plans.
24 2 The Seven Wastes of Lean Organization
Table 2.4 Prevention, appraisal and defectiveness costs
Prevention costs (Investments)
Improvement programs (Kaizen Workshops for Lean, Six Sigma teams, TQM teams for
improvement, etc.)
Quality management staff (not including quality inspection)
Quality management software, ERP costs
Quality management and laboratory instrumentation amortization (Research and Development,
prototypes, preventive tests, etc.)
External laboratories for preventive checks
Penalties for damage responsibility for defect products
Process identification, process management documentation
Training and creating awareness
External consultancies for Lean Six Sigma
Defining targets and goals for improvement
Quality planning
Data analysis and system reviewing
Measuring customer satisfaction
Measuring processes and self-assessment
QFD, FMEA and FTA processes, defining reliability goals, reviewing and checking design and
development, DFM, DFA, etc.
Product risk management
New product approval process
SPC management
Design of experiments
Preventive and predictive maintenance
Preventive supplier assessment
Identification and traceability of products
Studying reproducibility and repeatability of measures
Problem solving and managing preventive actions
Appraisal costs
Testing and inspection staff
Measuring equipment and device calibration staff
Measuring equipment and device amortization
Inspection software
External laboratories
Third party certifications
Incoming test and inspection
Inspections during production
Final inspection
Conducting internal inspection visits
Conducting inspection visits of suppliers to maintain qualification
Calibration and management of measuring equipment
Internal defectiveness (including Lean wastes)
Staff who manage defects
Amortization of equipment and machines dedicated to rework
Product rework
Scraps
Depreciation of products or services
(continued)
2.3 Classifying the Types of Waste 25
It is however useful to remember that the root cause has to be continually found
to reduce defects and inefficiency. Inspections that take place only when non-
conformities have been generated contain the problem but they usually do not
actually solve it. Table 2.5 is an example of a waste evaluation checklist.
2.3.4.1 Transportation
Excessive inventories inevitably lead to increased transportation activity. In
manufacturing, conveyances or transportations mainly concern the moving of
products from one warehouse to another, or from a warehouse to an activity of
the process. Usually transportations means moving between a warehouse or a stock
accumulation point to another, or from a warehouse to an activity of the process.
Examples of Unnecessary Transportations in Services. In one of the biggest
French hospitals transportation waste is, for example, the moving of patients from
one department to another, crossing areas that have not been sanitized. By moving
patients across unhygienic areas, the clinical risk of hospital-induced infections
increases.
Within an Italian city council, citizens that have concluded one process must
then walk half a kilometer to reach another office site.
In most European airports, baggage moves along a long conveyor belt to finally
be loaded onto the main conveyor belt. This long conveyor belt often jams and thus
slows down operations. To avoid this, baggage could simply be manually loaded
onto the main conveyor belt.
The causes of transportation are usually:
 A poor layout design;
 Too large lots;
 Workers with poor or limited skills;
 Accepting that conveyance/handling is inevitably part of the process.
Usually redesigning the layout reduces transportations. The following Lean tools
may help in this:
Table 2.4 (continued)
Selecting and rechecking products
Management of corrective actions
Breakdowns, small stops, reduced speed
Setup and adjustments
Increase in stock and handling costs
Excess of motions
Surpluses or shortages of staff, excessive turnover, absenteeism
Conducting inspections/audit after the production of non-conformities
Conducting inspections/audit after supplier non-conformities
Accidents at work
Environmental accidents
26 2 The Seven Wastes of Lean Organization
 Analyzing the flow with VSM and spaghetti-chart;
 U-cells;
 Using multi-skilled workers.
The following checklist (Table 2.6) is an example of assessment of the type of
waste.
2.3.4.2 Overprocessing
Waste during production generally refers to activities within the process that could
be unnecessary or not requested by the customers. This should not, however, be
confused with overproduction linked to necessary activities that produce more than
requested. For example, a worker operating a machine creates overproduction when
he or she produces products that gather in WIP because the next worker is not ready
to process them. However, the activity of the machine is not unnecessary. If the next
worker blocks and checks half way through the process then this leads to
overprocessing waste. By accurately designing the production or service process
using clear procedures and instructions, this type of waste can be eliminated; it is
important, however, that when the activity has been identified and standardized, all
staff should be well informed of this. Often a team for improvement may modify
production flow, design new instructions and procedures, but neglect to inform staff
who continue to work as before. Among the reasons for overprocessing within the
process the following are important:
 Inadequate process designing;
 Inadequate activity analysis;
Table 2.5 A typical checklist for defectiveness evaluation
Defectiveness assessment checklist
Process: Auditor: Date
# Description of waste Yes No Waste evaluationa Cause
1 Complaints from customers
2 General defects during the process
3 Defects linked to human mistakes
4 Defects linked to supplied material
5 Defects linked to machines and equipment
6 Defects linked to methods
7 Instruction/procedure details
8 Control plan details
9 Operators’ awareness regarding