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

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Perspectives in Business Culture
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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
Library of Congress Control Number: 2012935549
# Springer-Verlag Italia 2013
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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 regardingquality
10 Poka-yoke and Jidoca
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 27
 Incomplete activity standardization;
 Inadequate tools, machines and automations;
 Working with inadequate material.
Thus, removing waste can be done as follows:
 Redesigning the process;
 Reviewing the activity;
 Automating tasks;
 Revising and issuing instructions and procedures;
 Applying methods such as value analysis (VA) and value engineering (VE).
Table 2.7 is an example of a waste evaluation checklist.
Table 2.6 A typical checklist for evaluating waste in conveyance/handling
Transportation assessment checklist
Process: Auditor: Date
# Description of waste Yes No Waste evaluationa Cause
1 Inventory accumulating during transport
2 Changing method of transport during the path
3 Distance between one activity and another
4 Transport needs manual assistance
5 WIP among activities/processes
6 The previous and/or next activity is in a different area
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
Table 2.7 A typical checklist for evaluation of overprocessing during processes
Overprocessing within the process assessment checklist
Process: Auditor: Date
# Description of waste Yes No Waste evaluationa Cause
1 Is there an identified flowchart?
2 Unnecessary activities being performed
3 Activities that can be automated
4 Activities that can be removed without damaging the
quality of the product
5 Activities that can be removed without affecting
lead-time
6 Are flow, instructions and specifications well known?
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
28 2 The Seven Wastes of Lean Organization
2.3.4.3 Waiting
Waiting time concerns not only the workers’ activities, but also a machine’s
operations. Within the manufacturing industry, as in public administration, it is
quite common to see workers stationary at the machines, waiting for them to finish
an operation, as it is for the start of a meeting to be delayed because a document has
yet to arrive, or doctors having to wait for a report from another department. The
worst-case scenario is downtime linked to having to look for tools or documents
that are not ready. Waiting is probably the type of waste most accepted. Except in
the case of massive machine downtime, usually connected to the system breaking
down, it is usually considered inevitable. A worker waiting in front of a machine is
often believed to be the supervisor of that machine, and in many cases it stays
forgotten that the worker could, in the meantime, perform another activity. The
main causes of waiting are:
 Lack of balance between activities;
 Poor preventive maintenance;
 Production in big lots;
 Lack of order and cleanliness;
 Lack of procedures and instructions.
Removing these causes can be done as following:
 Leveling production;
 Improving layout;
 Preventive and predictive maintenance;
 Order and cleanliness (5S);
 Quick changeover;
 Mistake-proofing systems (poka yoke).
The following checklist (Table 2.8) is an example of waste type assessment.
Table 2.8 A typical checklist for waiting evaluation
Waiting assessment checklist
Process: Auditor: Date
# Description of waste Yes No Waste evaluationa Cause
1 Average waiting time before starting an activity
2 Average waiting time during machine work
3 Equipment availability
4 Balancing activities with those previous
5 Activity standardization
6 Preventive maintenance
7 Adequacy of amount of workers
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 29
2.4 Removing Waste
As soon as people are aware of what types of waste there can be in the processes of
all type of organizations, the organization must embark on the road of excellence,
striving to remove all waste.
The first important step to take, as will be described in the following chapter, is
that of identifying waste. Powerful process-mapping tools such as Value Stream
Mapping and Makigami, more helpful in service industries, will help identify the
main sources of waste, thus where to begin. The priorities identified through
mapping are coupled with strategic goals defined by management. Deployment
takes place using strategic planning methods such as Hoshin Kanri, illustrated in
Chap. 4.
Chapter 5 will introduce the traditional methods of managing improvement
projects linked to deployment, the Kaizen Workshops (teams for continuous
improvement), known both in the literature and in practice as Kaizen Event, Kaizen
Week, Kaizen Blitz, and so on. These events are performed in a relatively short
period of time (usually a week) by a team in full immersion, which solves problems
as soon as they crop up. Finally, Chaps. 6 and 7 introduce the basic methods used
during Kaizen Workshops, and how to measure the results in economic and
financial terms.
30 2 The Seven Wastes of Lean Organization
Chapter 3
Using Value Stream Mapping to Visualize
Value Added
Reality is what I see through my eyes, not through yours
Anthony Burgess
3.1 Introduction
Chapter 2 discussed how, usually, a company’s processes comprise many activities
of little value added because they also generate waste. It is hard to offer statistical
data on this topic, but referring to the 7 wastes or the items listed in the costs of poor
quality, it can be said that no more than 10% of all activities are actually value
added. Organizations that start using Lean, using Value Stream Mapping (VSM,
subject of this chapter), estimate a percentage of value added activities between 5 %
and 15 %. Value added is measured according to the value for money set down by
the customer.
Activities without value added and pure waste can be found within organizations
(e.g. producing too much stock due to a planning error, or data registered twice: on
paper and on a computer) but they are nonetheless important and inevitable for the
business. In a company that produces medical equipment, for example, preparing
the necessary certification documents for all products is mandatory, but some
customers do not want to pay for this activity.
The pie chart illustrated in Fig. 3.1 describes the average percentages of value-
added activities inside a product/service flow inside companies that have not yet
started to apply Lean Organization.
The waste that companies take more account of is usually listed in the seven
wastes defined in the previous chapter. However, among the activities without
value added there are activities such as checks, inspections, tests, loading and
unloading machines and data, to mention a few, that companies, out of habit, do
not consider to be waste.
Furthermore, there are mandatory activities such as risk management, financial
audit and many others unfortunately unpaid and not consideredvalue added by the
customers.
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_3,# Springer-Verlag Italia 2013
31
An economic–financial audit, for example, is more a typical business continuity
activity, rather than being something the customer asks for.
At the beginning of the journey, senior management defines targets and goals
and their deployment by using Hoshin Kanri as discussed in Chap. 4. Kaizen teams
pursue the KPI targets through KaizenWorkshops, but everyone has to learn how to
X-ray processes, find the waste and the ways to improve it.
The most important managerial method in this sense is VSM. This method
became famous thanks to Mike Rother and John Shook, who published the book
Learning to See, and specific software, such as Visio® by Microsoft®,1 made it
easier to integrate it in productivity documents of everyday computing. Actually,
this method has existed since the dawn of time and may actually have been
developed in connection with Toyota. Often nowadays this method is still used
on A1 sheets of paper so as to make it easier to identify waste activities quickly.
Many companies, in fact, prefer using areas A1 sheets, highlighting changes
between, before and after improvement, to make analysis easier and to avoid having
to wait for a computerized map:
Getting decisionmaking Leanmay mean, occasionally, relinquishing information technology
innovations.
Figure 3.2 shows a team drawing a VSM using papers on a table.
3.2 Managing Value Stream for Lean Organization
VSM can identify opportunities to eliminate waste, increase value added, and
improve flow main stream. Its application is, obviously, continuous, meaning that
each improved step can be questioned once again following the Deming PDCA
circle. As will be illustrated in the following chapter, VSM is a method that has to
be applied within a top-down, bottom-up strategic frame with goals and perfor-
mance indicators. The four most important steps of VSM are defined in Fig. 3.3.
Non-value-added activities
75%
Value-added activities
< 10%
Mandatory non-value-added activities
15%
Fig. 3.1 Average percentage of value-added activities inside a product/service flow
1Visio and Microsoft are registered trademarks of Microsoft Corporation.
32 3 Using Value Stream Mapping to Visualize Value Added
VSM can be applied both in manufacturing and in service industries, and in
production and in administration, by changing small details using Makigami (see
Chap. 8). The flow through VSM in service industries is not usually a flow of
materials, raw or unfinished; it is, rather, made up of data and information, both on
paper and on computer. This type of flow exists both in service industries, such as
education, and in so-called service processes inside manufacturing companies, such
as marketing, design, development, accounting, human resources and IT. All these
processes can be improved using Lean Office as discussed in the last chapter.
VSM is the first and most important managing method used to identify what
needs to be changed when striving to apply Lean and it can be divided as follows:
 Current state VSM (as is);
 Future state VSM (as should be).
Analyzing VSM with the KPIs that are being targeted defines the Kaizen
workshops that need to be launched, together with other long-term improvement
programs that should be applied, such as Six Sigma projects.
Fig. 3.2 Value stream mapping drawn by the team
Plan Define strategic goals and KPIs of improvement
Make staff of every level understand the importance of Lean
Do Identify a Value Stream Manager for VSM
Map out processes/products/services according to VSM
Implement redesigned VSM (future-state)
Check Measure the results obtained through KPIs and Lean Metrics
Monitor economic and financial results according to Lean Accounting
Act Communicate results to everyone in the organization
New targets and goals
New VSM
Fig. 3.3 Four steps of VSM management according to PDCA
3.2 Managing Value Stream for Lean Organization 33
VSM should be applied on various levels within the organization according to
the diagram in Fig. 3.4, which has been used by various authors.
In most cases, VSM is applied as a process-flow that is linked to a product part
number, a product family or a specific service. For example, a public administration
office that strives to reduce document processing lead time (L/T), can “photograph”
the process flow at the start of a KaizenWorkshop by using either VSM orMakigami.
Many organizations of excellence suggest that VSM needs to be used as a
method of analysis together with Hoshin Kanri; the latter identifies targets and
goals that need to be reached. When defining annual targets in a the column
identified as processes inside the x matrix (see Chap. 4) and filling out Team
charters, for example, it can be useful deepening the analysis by using VSM.
The foundation principle of VSM is, however, that it must be used to analyze
processes striving to achieve goals and not the goal itself. Many companies launch a
mapping campaign by using VSM applied to every single production code and/or
service, identifying inevitable delays in L/T, WIP and so on. But where do we start
without precise strategic goals? Usingwhich resources? Andwith what success rate?
Finally, nominating a Value Stream Manager, transversal to various Kaizen
teams, who can assume, according to the size of the company, other responsibilities
and even be member of senior management, is of vital importance. This manager is
assigned to managing improvement and studying the success of VSM – future state.
Clearly this manager has to be well known within the organization, well respected
and authoritative to carry out improvement projects; it is also important that the
manager is very familiar with Lean and other systems, such as Six Sigma.
3.3 Compilation of VSM as-is
Mapping the current flow “as is” is carried out, operatively speaking, by using
suggestions from organizations of excellence that have been using them for years.
To begin with, the following are of utmost importance:
Supplier/
Customer
Single plant
Processes 
Fig. 3.4 Levels of VSM
application
34 3 Using Value Stream Mapping to Visualize Value Added
 Having a clear idea, aided for example by a block diagram, of the complete
process flow according to the product, family or service, from the minute an
order is accepted to that of finished product/service;
 Identifying the detail level that has to be achieved; when mapping a product part-
number flow for the first time it is often unnecessary dividing a productive
process into many simple activities. It is better to understand immediately that
the process creates waste in terms of L/T or WIP; in a second instance details can
be added to identify the exact cause, to be then able to map out the flow in its
singular activities for example using Makigami;
 Starting to note Value Stream criticality, critical factors to success and ideas for
improvement;
 Identifying existing KPIs to measure process performance;
 Noting partial cycle times (C/Ts) and L/Ts;
 Noting stock levels, both WIPs and finished products;
 Measuring the percentage of on-time performance, both outwards to customers
and inwards from suppliers (e.g. % orders on-time, late, early, etc.);
 Measuring the approximate cost linked to Value Stream (e.g. transport, stock,
cost of poor quality, etc.).
When the aforementioned information has been collected, mapping can commence
either on paper or by using appropriate software; thus the steps are as following
(also consult the following examplesof maps):
 Drawing the initial icons of supplier and customer;
 Inserting the amounts requested by the customers in months and in days (when
talking about products);
 Calculating daily production and comparing this to the takt-time;
 Drawing the transport icon that leaves the supplier icon, indicating the frequency;
 Drawing the transport icon that reached the customer icon, indicating the frequency;
 Adding a table of processes in sequence, from left to right;
 Adding a data box under each process or activity;
 Adding methods and frequency of communication (communication arrows
pointing to the opposite direction of process flow);
 Obtaining process data and placing it into the data box;
 Adding symbols and number of operators;
 Adding inventories and their amount (day/quantity);
 Adding other information that may come in handy (e.g. changeover times, C/O)
 Adding work hours;
 Adding C/Ts and process times (P/Ts);
 Calculating total C/T and P/T in the bottom line.
When filling in the Value Stream, usually the icons used are the ones illustrated
in Table 3.1. These icons, which have become universal symbols within Lean
Organization, are explained in the right-hand column.
3.3 Compilation of VSM as-is 35
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b
o
x
es
,
ca
p
ac
it
y
)
O
n
T
im
e
D
el
iv
er
y
(O
T
D
)
If
it
re
fe
rs
to
a
cu
st
o
m
er
P
ro
d
u
ct
s
o
rd
er
ed
p
er
m
o
n
th
P
ro
d
u
ct
s
o
rd
er
ed
p
er
d
ay
S
al
e
fi
g
u
re
s
p
er
m
o
n
th
/y
ea
r
O
T
D
W
h
en
ta
lk
in
g
ab
o
u
t
se
rv
ic
es
th
e
co
n
ce
p
ts
ar
e
si
m
il
ar
w
h
en
ap
p
ly
in
g
ap
p
ro
p
ri
at
e
m
ea
su
re
s
N
u
m
b
er
o
f
h
o
u
rs
o
f
se
rv
ic
e
p
er
m
o
n
th
N
u
m
b
er
o
f
o
p
er
at
io
n
s
N
u
m
b
er
o
f
cu
st
o
m
er
ca
ll
s
N
u
m
b
er
o
f
d
o
cu
m
en
ts
p
ro
ce
ss
ed
E
tc
.
T
h
is
is
th
e
sy
m
b
o
l
th
at
re
p
re
se
n
ts
v
ar
io
u
s
p
ro
d
u
ct
io
n
p
ro
ce
ss
es
an
d
se
rv
ic
e
im
p
le
n
ta
ti
o
n
.
T
h
e
sm
al
l
sy
m
b
o
l
in
th
e
le
ft
-h
an
d
co
rn
er
is
a
w
o
rk
er
;
th
u
s
n
ex
t
to
it
th
e
am
o
u
n
t
o
f
w
o
rk
er
s
in
th
is
p
ro
ce
ss
ca
n
b
e
n
o
te
d
.I
n
th
e
b
o
x
in
th
e
ri
g
h
t-
h
an
d
co
rn
er
an
y
so
ft
w
ar
e
th
at
is
b
ei
n
g
u
se
d
ca
n
b
e
w
ri
tt
en
d
o
w
n
.
A
s
m
en
ti
o
n
ed
ab
o
v
e,
w
h
en
g
en
er
al
ly
m
ap
p
in
g
o
u
t
a
p
ro
d
u
ct
o
r
se
rv
ic
e,
it
is
b
es
t
to
co
n
ce
n
tr
at
e
o
n
th
e
p
ro
ce
ss
as
a
w
h
o
le
,u
si
n
g
st
o
ck
o
r
si
g
n
ifi
ca
ti
v
e
in
te
rr
u
p
ti
o
n
s
in
fl
o
w
as
a
p
h
y
si
ca
l
se
p
ar
at
o
r.
F
o
r
ex
am
p
le
a
ce
ll
th
at
w
o
rk
s
o
n
as
se
m
b
li
n
g
b
y
u
si
n
g
v
ar
io
u
s
m
an
u
al
ac
ti
v
it
ie
s
an
d
sm
al
l
o
p
er
at
io
n
s
w
it
h
p
re
ss
es
an
d
w
el
d
in
g
m
ac
h
in
es
is
b
es
t
co
n
si
d
er
ed
a
p
ro
ce
ss
;
if
th
e
w
el
d
in
g
,
h
o
w
ev
er
,
is
d
o
n
e
in
a
d
if
fe
re
n
t
d
ep
ar
tm
en
t,
th
en
it
is
b
et
te
r
to
d
iv
id
e
th
e
p
ro
ce
ss
.
S
im
il
ar
ly
,
in
an
o
ffi
ce
a
p
ro
ce
d
u
re
th
at
in
v
o
lv
es
g
at
h
er
in
g
d
o
cu
m
en
ts
th
at
n
ee
d
to
b
e
si
g
n
ed
b
y
a
d
ir
ec
to
r
(W
IP
)
ca
n
b
e
sp
li
t
in
to
tw
o
p
ro
ce
ss
b
o
x
es
36 3 Using Value Stream Mapping to Visualize Value Added
C/
T 
(C
yc
le 
Tim
e)
C/
O
 (C
ha
ng
eo
ve
r)
Qu
an
tity
W
ai
t
D
ow
nt
im
e
Sh
ift
s
R
ew
or
k
%
VA
 (V
alu
e A
dd
ed
)
U
su
al
ly
th
e
d
at
a
b
o
x
,
a
b
o
x
w
h
ic
h
co
n
ta
in
s
im
p
o
rt
an
t
in
fo
rm
at
io
n
ab
o
u
t
th
e
p
ro
ce
ss
,
is
p
la
ce
d
u
n
d
er
th
e
p
ro
ce
ss
b
o
x
.
C
/T
an
d
se
t
u
p
o
r
C
/O
ti
m
e
u
su
al
ly
ap
p
ea
r
in
al
l
p
ro
d
u
ct
io
n
p
ro
ce
ss
b
o
x
es
.
O
th
er
in
te
re
st
in
g
d
at
a
m
ay
b
e
u
n
it
s
p
ro
d
u
ce
d
p
er
d
ay
o
r
sh
if
t,
d
o
w
n
ti
m
e
an
d
u
p
ti
m
e
o
f
th
e
m
ac
h
in
e,
ti
m
e
sp
en
t
w
ai
ti
n
g
,p
ro
d
u
ct
s
th
at
n
ee
d
to
b
e
ri
el
ab
o
ra
te
d
o
r
re
je
ct
ed
,
th
e
p
er
ce
n
ta
g
e
o
f
ti
m
e
o
r
ac
ti
v
it
y
o
f
v
al
u
e
ad
d
ed
(a
ct
iv
it
y
o
r
am
o
u
n
t
o
f
ti
m
e
th
at
tr
an
fo
rm
s
th
e
p
ro
d
u
ct
in
to
so
m
et
h
in
g
th
e
cu
st
o
m
er
is
w
il
li
n
g
to
p
ay
fo
r)
,
et
c.
P/
T 
(P
roc
es
s T
im
e)
L/
T 
(Le
ad
 Ti
me
)
%
C&
A
In
a
se
rv
ic
e
in
d
u
st
ry
,
h
o
w
ev
er
,
it
is
m
o
re
ap
p
ro
p
ri
at
e
to
d
is
cu
ss
P
/T
ra
th
er
th
an
C
/T
.
P
/T
is
u
su
al
ly
le
ss
th
an
th
e
L
/T
o
f
th
e
p
ro
d
u
ct
b
ec
au
se
L
/T
in
cl
u
d
es
d
o
w
n
ti
m
e,
h
an
d
li
n
g
ti
m
e
an
d
ev
en
ti
m
e
sp
en
t
w
h
en
h
av
in
g
to
re
d
o
th
e
se
rv
ic
e
A
fe
w
o
rg
an
iz
at
io
n
s
al
so
u
se
P
er
ce
n
t
C
o
m
p
le
te
an
d
A
cc
u
ra
te
(%
C
&
A
),
w
h
ic
h
is
b
as
ic
al
ly
se
rv
ic
e
p
ro
ce
ss
u
p
ti
m
e,
th
e
p
er
ce
n
ta
g
e
o
f
ti
m
e
o
f
th
e
se
rv
ic
e
th
at
is
ta
k
en
u
p
b
y
p
ro
ce
ss
in
g
in
fo
rm
at
io
n
/d
at
a/
d
o
cu
m
en
ts
,
w
it
h
o
u
t
ta
k
in
g
in
te
rr
u
p
ti
o
n
s
in
to
ac
cou
n
t
25
0
5 
da
ys
T
h
e
in
v
en
to
ry
sy
m
b
o
l
m
ak
es
th
e
b
u
il
d
u
p
o
f
p
ro
d
u
ct
s
b
et
w
ee
n
o
n
e
p
ro
ce
ss
an
d
an
o
th
er
v
is
ib
le
.
In
v
en
to
ry
ca
n
al
so
b
e
ex
p
re
ss
ed
in
W
IP
o
r
ti
m
e,
an
d
in
se
rv
ic
es
o
r
o
ffi
ce
s
it
m
ay
re
fe
r
to
d
o
cu
m
en
ts
,
em
ai
ls
,
o
ff
er
s
an
d
fo
ld
er
s
th
at
n
ee
d
to
b
e
p
ro
ce
ss
ed
o
r
st
o
re
d
.
T
ra
d
it
io
n
al
ly
,
th
e
ic
o
n
h
as
th
e
sh
ap
e
o
f
a
tr
ia
n
g
le
to
w
ar
n
u
se
rs
o
f
w
as
te
(c
o
n
ti
n
u
ed
)
3.3 Compilation of VSM as-is 37
T
a
b
le
3.
1
(c
o
n
ti
n
u
ed
)
Ic
o
n
H
o
w
to
u
se
it
T
h
e
st
ri
p
ed
ar
ro
w
re
p
re
se
n
ts
m
o
v
in
g
m
at
er
ia
ls
in
a
“p
u
sh
”
ac
ti
o
n
fr
o
m
o
n
e
p
ro
ce
ss
to
an
o
th
er
o
r
to
w
ar
d
s
th
e
cu
st
o
m
er
;
th
e
th
in
n
er
ar
ro
w
st
an
d
s
fo
r
“p
u
ll
”.
W
h
en
p
u
sh
in
g
,
th
e
m
at
er
ia
l
m
o
v
es
in
ab
se
n
ce
o
f
sc
h
ed
u
la
ti
o
n
,
o
r
in
o
v
er
p
ro
d
u
ct
io
n
w
it
h
o
u
t
fo
ll
o
w
in
g
th
e
ta
k
t
ti
m
e
o
f
sa
le
.
In
th
es
e
ca
se
s
it
is
b
et
te
r
to
g
o
se
e
sc
h
ed
u
la
ti
o
n
,
th
e
ty
p
e
o
f
k
an
b
an
an
d
th
e
am
o
u
n
t
o
f
p
ro
d
u
ct
s
to
th
at
m
ay
cr
ea
te
in
ev
it
ab
le
w
as
te
R
ep
re
se
n
ts
sh
ip
p
in
g
(o
ft
en
as
so
ci
at
ed
w
it
h
a
lo
rr
y
sy
m
b
o
l)
A
rr
o
w
th
at
re
p
re
se
n
ts
in
fo
rm
at
io
n
ex
ch
an
g
e
b
et
w
ee
n
p
ro
ce
ss
es
.
T
h
e
d
ir
ec
ti
o
n
o
f
th
e
fl
o
w
is
o
p
p
o
si
te
to
th
at
o
f
th
e
m
at
er
ia
ls
(f
ro
m
ri
g
h
t
to
le
ft
).
T
h
is
ar
ro
w
re
p
re
se
n
ts
in
fo
rm
al
(e
.g
.
v
ia
p
h
o
n
e)
o
r
fo
rm
al
(e
.g
.
fo
rm
)
in
fo
rm
at
io
n
E
le
ct
ro
n
ic
in
fo
rm
at
io
n
ex
ch
an
g
e
ar
ro
w
(e
x
tr
an
et
,
in
tr
an
et
,
et
c.
)
38 3 Using Value Stream Mapping to Visualize Value Added
S
af
et
y
st
o
ck
T
h
e
“s
u
p
er
m
ar
k
et
”
is
a
ty
p
ic
al
W
IP
th
at
b
ec
o
m
es
n
ec
es
sa
ry
so
m
et
im
es
w
h
en
th
e
fl
o
w
ca
n
n
o
t
b
e
k
ep
t
u
p
to
sp
ee
d
.
F
o
r
ex
am
p
le
w
h
en
d
ea
li
n
g
w
it
h
sl
o
w
er
p
ro
ce
ss
es
(e
.g
.
a
h
ea
t
tr
ea
tm
en
t
th
at
o
n
ly
p
ro
ce
ss
es
o
n
e
lo
t
at
a
ti
m
e)
th
at
ar
e
fo
ll
o
w
ed
b
y
fa
st
er
p
ro
ce
ss
es
(e
.g
.
a
o
n
e-
p
ie
ce
-fl
o
w
ce
ll
),
o
r
su
p
p
li
es
th
at
co
m
e
fr
o
m
a
su
p
p
li
er
w
h
ic
h
ei
th
er
h
as
th
e
sa
m
e
p
ro
b
le
m
,
o
r
is
n
o
t
ab
le
to
se
n
d
sm
al
l
lo
ts
d
u
e
to
lo
g
is
ti
ca
l
p
ro
b
le
m
s.
T
h
e
su
p
er
m
ar
k
et
,
co
m
b
in
ed
w
it
h
K
an
b
an
,
h
el
p
s
to
av
o
id
sc
h
ed
u
la
ti
o
n
an
d
li
m
it
s
in
v
en
to
ri
es
(w
h
ic
h
h
o
w
ev
er
st
il
l
re
p
re
se
n
t
w
as
te
)
1
2
Ka
nb
an
 
pr
od
uc
tio
n
Ka
nb
an
 
w
ith
dr
aw
al
If
,
h
o
w
ev
er
,
th
e
su
p
p
ly
in
g
p
ro
ce
ss
(n
u
m
b
er
1
in
th
e
fi
g
u
re
)
m
an
ag
es
to
p
ro
d
u
ce
th
e
p
re
ci
se
lo
t
o
r
am
o
u
n
t
o
f
p
ro
d
u
ct
re
q
u
es
te
d
b
y
th
e
cu
st
o
m
er
,
in
st
ea
d
o
f
th
e
su
p
er
m
ar
k
et
,
th
at
,
u
su
al
ly
,
co
n
ta
in
v
ar
io
u
s
co
d
es
o
r
p
ar
t
n
u
m
b
er
s,
a
“s
eq
u
en
ti
al
p
u
ll
”,
re
p
re
se
n
te
d
b
y
tw
o
ci
rc
le
s
w
it
h
th
e
sa
m
e
ce
n
tr
e
(c
o
n
ti
n
u
ed
)
3.3 Compilation of VSM as-is 39
T
a
b
le
3.
1
(c
o
n
ti
n
u
ed
)
Ic
o
n
H
o
w
to
u
se
it
U
si
n
g
su
p
er
m
ar
k
et
lo
g
ic
,
th
e
“p
ac
em
ak
er
”
co
n
ce
p
t
ca
n
b
e
in
tr
o
d
u
ce
d
;
a
p
ro
d
u
ct
io
n
p
ro
g
ra
m
th
at
is
p
la
ce
d
in
o
n
e
si
n
g
le
p
o
in
t,
fo
r
ex
am
p
le
th
e
la
st
p
ro
ce
ss
b
ef
o
re
th
e
p
ro
d
u
ct
re
ac
h
es
th
e
cu
st
o
m
er
,
w
h
ic
h
d
ic
ta
te
s
th
e
rh
y
th
m
o
f
th
e
re
m
ai
n
in
g
p
ro
ce
ss
es
o
f
th
e
fl
o
w
Sc
he
du
lin
g
Customer
T
h
e
K
an
b
an
sy
m
b
o
l
u
su
al
ly
m
ea
n
s
a
re
o
rg
an
iz
in
g
p
o
in
t
fo
r
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40 3 Using Value Stream Mapping to Visualize Value Added
T
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 5
 p
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ex
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,
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s,
fo
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ex
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p
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an
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fi
rs
t
p
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lo
ad
ed
o
n
to
th
e
b
el
t
(fi
rs
t
in
)
w
il
l
b
e
th
e
fi
rs
t
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n
e
o
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t
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f
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rn
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(fi
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It
is
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b
al
an
ci
n
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p
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n
s
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se
t-
u
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s,
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tr
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ci
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ch
n
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lo
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d
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si
n
g
U
-s
h
ap
ed
ce
ll
s
C/
T 
30
m
L/
T 
8 
h
T
h
e
ti
m
e
se
g
m
en
ts
ar
e
p
la
ce
d
at
th
e
b
o
tt
o
m
o
f
th
e
m
ap
;
th
ey
su
m
u
p
al
l
L
/T
s
in
th
e
h
ig
h
er
p
ar
t
an
d
C
/T
o
r
P
/T
in
th
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lo
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p
ar
t.
T
h
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lo
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p
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n
ex
t
to
th
e
p
ro
ce
ss
b
o
x
(c
o
n
ti
n
u
ed
)
3.3 Compilation of VSM as-is 41
T
a
b
le
3.
1
(c
o
n
ti
n
u
ed
)
Ic
o
n
H
o
w
to
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se
it
T
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ta
l
ti
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at
o
r
is
p
la
ce
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th
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n
al
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h
an
d
si
d
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o
f
th
e
in
d
ic
at
o
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se
g
m
en
ts
;
in
th
e
to
p
b
o
x
to
ta
l
L
/T
is
in
d
ic
at
ed
,
in
th
e
b
o
tt
o
m
to
ta
l
C
/T
o
r
P
/T
G
o 
Se
e 
Sc
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lin
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o
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li
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la
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g
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li
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at
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ay
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ee
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IP
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or
ks
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p
Ka
iz
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g
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ra
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it
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42 3 Using Value Stream Mapping to Visualize Value Added
Figure 3.5 shows a typical VSM completed by a manufacturing company. The
map also contains processes linked to product design and managing orders, so as to
successfully work with Lean Office workshops.
Figure 3.6, by contrast, shows a simple VSM, drafted by Chiarini & Associates’
consultants before defining strategic goals for improvement. The VSM was mapped
out especially for a certain family of superficial treatments applied to materials that
are delivered by a supplier, undergo 3 different treatments and are then sent to a
second supplier, which then returns them for a quality inspection. One of the goals,
linked to the business plan, was to reduce L/T and thus WIP. By introducing the
supply chain, the supermarket and a cell where SMED and TPM workshops were
carried out, in a few weeks the L/T was reduced to 18 days, with several financial
benefits. Kaizen workshop icons have been added to underline the types of Kaizen
projects carried out successfully by the teams.
The blue triangles, that normally are yellow, indicate inventories of drugs
between five hospital departments and the point of administration, and this was a
relevant waste in terms of cash flow. In addition VSM enables the measurement of
wastes such as motion, transportation and overprocessing. Even if this was not the
Fig. 3.5 Current state map “As is”
3.3 Compilation of VSM as-is 43
main target of the project, the VSM in Fig. 3.7 underlines, for example, that inside
the five departments the preparation of antiblastic drugs took 3 h and this is
considered a long time. Furthermore, nurses had to walk a long distance from the
pharmacy to the departments to deliver the drugs, which were also dangerous
during handling. In addition, the management of the created inventories in the
department stockrooms set the lead-time at 5 days. In fact, the drugs inside the
departments were stored using the FIFO method and each drug that entered
the stock was unloaded on average after 5 days. The yellow clouds indicate the
main improvements required.
A Lean Six Sigma project led to a reduction of WIP preparation and administra-
tion areas, saving the hospital around two million Euros.
3.4 Mapping the Future State
Mapping future state is only possible after having mapped out the current state,
where the most important waste is identified. In the manufacturing sector, waste is
often linked to takt-time (sales rhythm). Processes have to follow this rhythm and
Fig. 3.6 Value stream future state map
44 3 Using Value Stream Mapping to Visualize Value Added
the flow has to be as continuous as possible. To achieve these targets the company
should:
 Evaluate whether the supermarket should be used for the customer, or whether
the through Kanban “Just in time” mix could be delivered directly;
 Consider introducing a pacemaker, on which the order planning is installed.
Remove all waste that interrupts the flow’s pull, for example by reducing set-up
time, improving preventive/predictive maintenance, start working towards one-
piece-flow cells, introduce new mistake-proofing systems (poka yoke) for defects,
etc. These methods will all be discussed in Chap. 6.
In the service industry, maintaining pull mainly means reducing waiting time
between the various activities and the document/data WIP that is produced; for
example, how long it takes to issue an offer or an invoice. In more critical situations
WIP can be customers queuing up for an office or for an appointment with a
specialist.
Finally it should be mentioned that VSM can also be used to identify waste
linked to problems regarding safety at work and environmental issues. The map of
the hospital pharmacy, for example, concentrates on the routes the workers take
within the departments; thus allowing management to ponder the risk of a vial of
antiblastic medicine breaking, which could endanger the worker.
Fig. 3.7 VSM “as-is” of the antiblastic drug flow inside an hospital
3.4 Mapping the Future State 45
3.5 Mapping at Process Level
VSM can also be used to analyze activities that make up a process in more detail, to
help understand if they have or do not have value added, how they can be removed/
improved by using Kaizen Workshops or other improvement projects. The example
below is about process improvement within a manufacturing cell. VSM inF8 shows
that after having mapped out the process, the team decided to concentrate on the
activities that created relevant amounts of waste.
Example: Process VSM and the Results Achieved. Consider the VSM of
Fig. 3.8.
The processing has an output of lots of 250 products of the same code, and
produces 5 days in terms of WIP.
The company decided to launch a Kaizen Workshop to divide the lot of 250
products with the same code into smaller lots of different codes. During the
workshop the team underlined the fact that the process needed reorganizing; a
first Kaizen workshop introduced a U cell and a second one concentrated on SMED.
The reorganization led to the lot preparation being shifted and visual checks of the
welding and press area. The number of workers did not change but they underwent
training to become multifunctional, able to prepare lots, work in welding and in
pressing. The rationalization of the area thanks to the workshop eliminated the middle
break and so working towards and from said break. The results of the workshop are
illustrated in Fig. 3.9. Graphically the results are not very obvious, but the company
managed to not only remove the break, but also regain 40 square meters of space,
which was then immediately taken up by a vital product-testing laboratory.
Visual Inspection
250
FIFO
Welding Press
FI
FO
Lot preparation
C/T = 2' per product,
500' per lot
C/T = 4.5' per
product 
C/T = 4.5' per
product 
C/T = 1.5'
C/O= 330'
SMED
U Cell
Dimensional
Inspection
C/T = 6.5' per
product 
Fig. 3.8 VSM before the Kaizen workshop (as-is)
46 3 Using Value Stream Mapping to Visualize Value Added
The second Kaizen Workshop, almost simultaneous to the first, focused on
reducing the press set-up time from a C/O time of 330 min down to 26 min.
Changing the press’s mold and equipment more quickly and channeling the flow
into a U shape could drastically reduce WIP and thus L/T. The “economical” lots of
250 products per code were replaced with lots of 25 products per code, thus moving
closer to the takt-time. Starting with the situation illustrated in Fig. 3.8, during the
workshop the Kaizen team listed on the data collection page of Fig. 3.10 all the
activities of the process with all relevant times and distances covered in the case of
transport.
The team re-engineered the process by pondering which activities were of little
value added that had to be removed or changed. The three movements that have
been highlighted in grey in Fig. 3.10 were eliminated, saving time and space.
At this point one certainly wonders how to measure the results by using
accounting systems. Chapter 7 concentrates on this topic by introducing Value
Stream Accounting – Lean Accounting, which is an evolution of the most famous
company accounting system.
As will be explained in said chapter, by using traditional accounting often the
results that come from improvement programs go unnoticed, and so new systems
have to be applied if the economic and financial results are to be appreciated as a
whole.
Visual Inspection Welding Press
Dimensional 
Inspection
FI
FO
Lot preparation
C/T = 3' per product, 
75' per lot
C/T = 4.5' per 
product 
C/T = 4.5' per 
product
C/T = 1.5'
C/O= 26'
C/T = 6.5' per 
product
Fig. 3.9 VSM after the Kaizen workshop (future-state)
3.5 Mapping at Process Level 47
Bibliography
Chiarini, A.: A system to improve logistic antiblastic management inside the health care using
Lean Six Sigma tools: the case of the Pharmacy Department of “Policlinico Le Scotte”, Siena.
In: Proceeding Acts of “Logistics Research Network Annual Conference”, Cardiff University,
Sept 2009
Chiarini, A.: Risk management and cost reduction of antiblastic drugs using lean six sigma tools.
Leadersh. Health. Serv. 25(4) (2012)
Chiarini, A.: Lean Production: mistakes and limitations of accounting systems inside the SME
sector. Int. J. Manuf. Technol. Manag. 23(5), 681–700 (2012)
Hines, P., Rich, N.: The seven value stream mapping tools. Int. J. Logist. Manag. 17(1), 46–64
(1997)
Fig. 3.10 Activity analysis worksheet
48 3 Using Value Stream Mapping to Visualize Value Added
Hines, P., Rich, N., Bicheno, J., Brunt, D., Taylor, D., Butterworth, C., Sullivan, J.: Value stream
management. Int. J. Logist. Manag. 4(2), 235–246 (1998)
Joint Commission Resources: Doing More with Less, Lean thinking and patient safety in health
care. Jt Comm. (2004)
Keyte, B., Locher, D.: The Complete Lean Enterprise Value Stream Mapping for Administrative
and Office Processes. Productivity Press, Cambridge, MA (2004)
Rother, M., Shook, J.: Learning to See, value stream mapping to add value and eliminate muda.
Lean Enterprise Institute, Cambridge, MA (1999)
Suri, R.: Quick Response Manufacturing. Productivity Press, Cambridge, MA (2004)
Bibliography 49
Chapter 4
Strategic Planning: Hoshin Kanri
The future doesn’t exist, it’s something we chase and as soon
as we reach it, it immediately becomes present and then past
Jim Morrison
4.1 Introduction
In Japanese, the word Kaizen is formed by uniting the two words Kai and Zen. Kai
means “to take something apart, to analyze critically”, and Zen “to do well”: Kaizen
literally means taking something apart and then building it up again. Organizationally
speaking, the equivalent meaning of Kaizen in the Western world is continuous
improvement: continuously analyzing every process/activity and removing obstacles
that stand in the way of improvement. Lean Organization, likemany other systems for
excellence, is based on the core engine that is continuous improvement. Continuous
improvement applies to every process and leads to performance increase and econom-
ical/financial results. However, continuous improvement requires strong commitment
and effort frommanagement in each and every department. Kaizen is a useful aid that
immediately highlights the road that must now be taken. This road, which is rugged
and steep and has no final destination for rest and celebration, has to be walked by
every worker. Unfortunately many pioneers are satisfied with the first meager results,
and stop there to celebrate, whereas only a few continue their journey towards gold.
4.2 Lean: A First Warning
A system for excellent management, like Lean, requires a strategic planning
process. This initially defines results to be achieved in a middle- to long-term
period, which can subsequently be developed by using a shorter deployment
process. This approach is based on Deming’s Plan, Do, Check, Act (PDCA)
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_4,# Springer-Verlag Italia 2013
51
guidelines and makes use of Vision and Mission, finding a solid basis in the Key
Performance Indicators (KPIs). Total Quality Management (TQM)and Lean have,
for this purpose, encouraged organizations to use deployment methods such as
Balanced Scorecard, Hoshin Planning, and so on, that are vital to get the ball rolling
and to maintain a system for the excellence.
Many consultants and academics believe that Kaizen has to move in a bottom-up
direction, from the traditional productive processes and service implementation
towards directive processes. The approaches illustrated in Fig. 4.1 have been
debated for over 20 years. So-called classical organizations prefer to introduce
improvement using a top-down approach, whereas excellent Japanese organizations
tend to concentrate first on production (Gemba) and subsequently on other
functions, to then finally reach Lean Enterprise or Lean Organization. This way
of thinking is not precise and has been surpassed by many Lean organizations.Lean
organizations prefer a strategic top-down planning and project launch, mostly in
production/service implementation (where most waste is hidden) and later in the
remaining functions/processes. To measure these results one must then proceed
bottom-up towards senior management for analysis and subsequent planning.
Figure 4.2 synthesizes this approach. It is vital to involve the whole production/
service implementation sector; however, if one only concentrates on improving
production, without a strategic plan, the following often happens:
 Launching Kaizen events on behalf of production management, without ensur-
ing that higher management is indeed committed, can result in the system
“dwindling” out.
 Reduction of waste that is not a priority in the organization’s strategy.
 Using up resources to reduce waste whose root causes lie in other functions such
as design, development, trade, sales, etc.
 Managing improvement projects without adequate equipment.
Lean has been used so much recently that it has become almost a trend, and
many books suggest methods to identify waste without, unfortunately, indicating a
Traditional Top-Down
approach
Japanese Bottom-up
approach
Production process
(Gemba)
Fig. 4.1 How improvement should not be approached
52 4 Strategic Planning: Hoshin Kanri
strategic route to follow. By visiting various companies it has become clear that
some have launched improvement projects without a clear idea regarding results
and goals. Often, attempts at emulating something so important “the Italian way”
could, in fact, defend small Italian industries from the competition.
Ask the managers a simple question: how high was the impact in terms of cost reduction?
The top-down Japanese target deployment process (development and applica-
tion) Hoshin Kanri is the Japanese equivalent of Policy Deployment; it is managed
by various teams, from senior management (business level) to middle management
(operation level), reaching the entire workforce that is involved in the Kaizen event.
Via a cyclic process that never ends, every year real Lean Organizations define
short-term goals and KPIs, which are then developed into improvement projects;
the results are checked, standardized and then reported to management, thus
allowing analysis that is then used to set new targets. This complete approach
that begins with Mission-Vision is typically found in many systems for excellence
such as TQM, Six Sigma and obviously Lean. In the best Western and Japanese
organizations, however, the top-down process follows a process similar to the one
illustrated in Fig. 4.3.
The mission is the reason why the organization exists and usually is:
 As brief as possible;
 As motivating and orientating for the staff as possible.
When formulating the mission, the following questions must be answered:
 Who are the customers?
 Which customers are the (possibly) more interesting ones?
 What are their needs?
 How do they measure performance?
 Which products/services do they receive?
 Do products/services supplied exceed their expectations?
The following are examples of Lean Missions; the first one comes from a public
administration office, the second from a traditional manufacturing company.
Business 
Long term 
objectives
Operations
Processes
Workshop Kaizen 
DMAIC 
day-by-day improvements 
Cost Management 
and reporting
Annual KPIs
Fig. 4.2 Deployment of a
Lean Six Sigma system
4.2 Lean: A First Warning 53
4.2.1 Examples of Mission in Lean
We aim to supply quality, solutions and profitable services to the members of our
community by using our talented human resources. We acknowledge a social and
ethical responsibility and strive for the continuous reduction of waste within our
processes. We shall respond continuously to the requests of the global hydraulic
component market, supply products free from faults, and surprise our customers
with our service and ready smile.
The organization’s value guides are usually somewhat linked to the Mission;
they are the pillars and foundation of the organization itself, basic conduct rules that
everyone has to follow. This is yet another example of an excellent manufacturing
company.
4.2.2 Examples of Value Guides in Lean
The fundamental values of our company that we believe in are:
 Every workers’ goal is to satisfy our customers 100%.
 Health and safety must always be kept at excellent levels.
 Continuous and unconditional reduction of any form of waste in every process at
every level.
 Respect towards staff regardless of their position, gender, religion, race, political
orientation, or membership of any legal organization.
 Respect towards our environment because it is our only resource and must not be
damaged.
MISSION
VALUE GUIDES
VISION 3-5 YEARS
BUSINESS PLAN
HOSHIN 1 YEAR
IMPROVEMENT 
PROJECTS AND
KAIZEN WORKSHOP
Fig. 4.3 The main processes
of strategic top-down
planning
54 4 Strategic Planning: Hoshin Kanri
 Sales and profits must be achieved using the highest business ethics.
 The added value of our products and processes and the contribution of our
technological innovations will benefit all of society.
 Creating common welfare through our business for everyone: workers,
suppliers, customers, shareholders, and the community.
Please note that the basic values of this manufacturing company focus on
satisfying the customer (effectiveness), unconditionally reducing waste (efficiency)
and improving health and safety conditions.
The Vision represents the long-term (over 3–5 years) organization of the com-
pany: like the mission, it simply has to supply a few but precise goals that need to be
achieved. In particular, Vision is:
 An image of the future that pushes the company in a precise direction.
 Possibly made up of metaphors, models, images, slogans, comparisons, and
similarities.
 Stimulating for both staff and outsiders.
 A reminder of the strategies that need to be applied and the goals that need to be
achieved.
Many Visions and Missions of the past have provided inspiration to other
organizations. Canon’s Vision of the 1970s is particularly famous (Beat Xerox) or
the current Mission of the main Chinese car manufacturer, Geely (make sure that
Geely cars are known all over the world).
The following examples are Visions of European manufacturing companies and
public administration offices that have applied Lean.
4.2.3 Examples of Vision in Lean
Become the “first in class” of the group through our performance in profitability, added
value, quality, service and ethics, making every member of our staff proud of this and
making it clear to everyone, including our rivals, that this is the way forward for everyone.
The Vision of our operating sanitary units is to continuously improve the qualitative
standards of our services, reducing year by year the existing waste and making these results
public and comparable.
The business plan (BP) leads to the deployment of the long-term Vision goals,
which are usually effective for 3 years. Thus, in the process of deployment, the
goals of the lower level become the tools and methods to achieve the goals of the
next level. The company that declares its Vision is to become first in class within
the group through their performance in profitability will have to do so using
methods such as Earnings Before Interest and Taxes (EBIT). EBIT is a 3-year
goal that can be achieved through yearly means/shares that then become goals
themselves. The BP can be structured by using various methods, such as Balanced
Scorecard developed in Harvard, or Hoshin Kanri used by many Japanese
4.2 Lean: A First Warning 55
companies like Toyota, Komatsu, andso on. This paragraph will focus on Hoshin
Kanri because it works best with the implementation logics of Lean Organization.
Hoshin Kanri requires a series of documents and checks according to the type of
deployment that need to be done. The first table of Fig. 4.4 lists the various methods
used by Lean, the length of time they need to be applied for, and the teams that
manage them.
The top-down Lean deployment process starts with long-term strategic targets
and is managed by different teams, as shown in the second table of the figure.
As will be illustrated in the following chapter, Kaizen workshops are not the
only methods used by organizations of excellence. Toyota itself uses Kaizen
workshops that usually last a week, together with teams that work on long-term
problem solving.
These types of operations usually generate a lot of documentation, which is then
summarized on A3 sheets of paper called Problem Reports. Figure 4.5 illustrates an
Period Method Management
Over five years Vision, Mission Hoshin Team and Top Management
Three years X-Matrix Hoshin Team
One year Yearly Hoshin (Team charter) Hoshin Team and Management
Month, three 
months, year
Managing KPIs Middle Management 
Day, week, month Andon, Heijunka (Visual Control 
and Management)
Workers, Middle Management 
Team involved Managed processes
1 Directional team (Hoshin Team, 
Steering Committee, Senior 
Management Team)
1 Defining long-
term targets
General Action plan with strategic goals 
over 5 years that strive to align the 
company to Vision and Mission
2 Defining 
medium-term 
targets
Targets over 3 years that arise from 
long-term targets. Creation of a BP that 
strives to improve the abilities of the 
operations, moving towards the long -
term targets
2 Operational Teams 3 Defining yearly 
targets or 
Hoshin
Precise action plans that strive, within 
the year, to align operations with targets 
3 Kaizen Team 4 Kaizen 
Workshop 
Rapid operations (up to 10 working 
days) and full-immersion that strive to 
reduce waste according to annual 
targets 
Fig. 4.4 Hoshin Kanri methods, teams and management
56 4 Strategic Planning: Hoshin Kanri
example of this. The A3 size was also useful, before the computer era, because it
could be sent via fax.
The Hoshin team, which is usually made up of members of staff at high levels in
the organization, prepares the BP by using the X-matrix that contains the long-term
targets, the tactics (actions to achieve these targets) and deployment, based on
processes evaluated with yearly targets/indicators. The X-matrix is prepared and
supported by other reports according to the indications of Fig. 4.6.
The Intelligence report is the first document that starts the strategic planning
process; it contains a review by the Hoshin Team, which states the targets of the
previous year and formulates a hypothesis for the new 3-year goals (each year
rolling). Figure 4.7 illustrates an example of this report.
A3 –PROBLEM REPORT
# TEAM:
DESCRIPTION:
COUNTERMEASURES:
CURRENT STATE:
ANALYSIS: IMPLEMENTATION PLAN:
What Who When Outcome Check
FOLLOW UP AND CLOSURE:
Fig. 4.5 A3 problem report
4.2 Lean: A First Warning 57
INTELLIGENCE REPORT: is used (in the phase before issuing the BP) by the senior 
management (Hoshin Team) to analyze the previous trend and formulate speculations and 
implications for the future.
X-MATRIX: lies at the heart of deployment, it is the equivalent of a BP, and relates long-term 
strategies to the tactics, thus leading to annual targets (processes) and the economical-financial 
results expected.
TEAM CHARTER: used to plan the moves, targets, the subsequent analysis and checks to 
reach an annual goal (processes); it is also used to manage improvement programs that are not 
directly coordinated by the X-matrix; it is filled out by a team and discussed with the Hoshin 
Team.
STATUS REPORT: is a monthly progress report regarding the annual goals discussed in the 
Team Charter; it is filled out by the team leader and discussed with the Hoshin Team.
PROBLEM REPORT: is a chart that suggests a way to solve a problem that was not discussed 
in the annual planning phase (Team Charter); it is filled out by the team leader and discussed 
with the Hoshin Team.
Fig. 4.6 Documents linked to the Hoshin Kanri strategic planning
OBSERVATION AND DATA ANALYSIS
In 200x the US turnover was:
1.800.000 $ in the East zone;
600.000 $ in the West zone;
2.300.000 $ in the remaining states;
1.600.000 $ in Canada
The trend is:
-10% in the East zone;
-29% in the West zone;
-16% in the remaining states;
-5% in Canada
The evident drop in the market, especially in the 
West (California leading) is surely due to the 
arrival of the Mexican competitor “Zonda”; Zonda 
is very aggressive in prices and has a very high on-
time delivery rate (as described by US customers), 
but, fortunately for us, products that are less 
reliable than ours. Zonda sells directly in most of 
the center and western area and uses a sole dealer 
in Canada. This dealer is surely not better than ours 
in service, although it obviously did not exist 
before eroding our 5%. 
The problem lies in the whole of the USA, where 
we have few dealers (2). We suggest, therefore, a 
quick inquiry (within a year) for new dealers (at 
least 3) to be able to keep pursuing our difficult 
target of + 30%. 
IMPLICATIONS FOR THE BUSINESS
Further decline in 200x for the USA (of at least 
another 20%) if no dealers are found.
Stabilization in the Canadian market.
Fig. 4.7 Intelligence report regarding sales
58 4 Strategic Planning: Hoshin Kanri
It is clear that the report analyzes the situation related to the previous activity,
leading to the definition of a strategic target; this will then be inserted in the
X-matrix as a new 3-year goal. In this case, the target involved focusing on
increasing the turnover in the American market; this turnover had been suffering
due to the lack of dealers. In the report illustrated in Fig. 4.8, however, the poor
situation of an EBIT that is decreasing year by year is analyzed. This company
could regain EBIT percentage points by reducing waste and its management, or by
improving standardization and reducing diversity of components. Finally, in
Fig. 4.9, a similar form used by a public health organization is shown.
The Intelligence report is an input document used for strategic planning that then
becomes practice through the X-matrix (Fig. 4.10). In the Intelligence report, the
left-side columns contain long-term strategic goals (objectives) and their relative
targets. In the rows above, the tactics needed to achieve these strategic 3-year goals
INTELLIGENCE REPORT – 4
Competitive information report Theme: Increasing EBIT
OBSERVATION AND DATA ANALYSIS
In 200x, EBIT was:
+ 1.3%
The business revenues show stability of 
turnover and various costs (% variation to the 
previous year)
52.300.000 : +0,8%;
Commercial and administrative costs: +1,1%;
Design and R&D costs: -0,9%;
Overhead and production costs, however, 
have considerably increased:
Direct production costs: + 3,4%;
Raw material and semi-finished product costs: 
+ 3,6%
Overhead: + 6,7%
The increase in production costs is due to the 
recruitment of new workers in the assembly 
departments and due to reprocessing hours. 
Overhead costs, however, have increased 
partially due to the recruitment of a
maintainer (+1,7%). Overhead costs also hide 
around 288 000 euros linked to managing 
waste and customer returns, and around 236 
000 euros of handling to and forth from lines 
and warehouses. Adding these two together 
almost 1% of the EBIT is eroded. The 
increase in price of various raw materials, in 
particular of steel,caused an increase in 
purchasing prices of 3,6%. These increases 
have been now registered for the fourth year, 
eroding around 1% of EBIT every year. 
Reducing the code variability, a project now 
postponed for the third year in a row could 
surely increase EBIT by 2%. 
IMPLICATIONS FOR THE BUSINESS
A project dedicated to reducing variability of 
components needs to be launched urgently, 
otherwise EBIT could reach 0 within two 
years. 
Fig. 4.8 Intelligence report regarding EBIT
4.2 Lean: A First Warning 59
can be found. The box in the upper left-hand corner shows the correlations between
objectives and tactics where rows and columns meet.
The symbols indicate either a strong correlation (two circles with the same
center), or an existing correlation or a weak/non-existent correlation (a triangle).
Moving clockwise, the right-hand columns contain the annual deployment of the
strategic 3-year goals and their tactics (process column).
The deployment thus leads to the calculation of yearly goals, which are
measured using KPIs and the targets that need to be reached. Among KPIs, those
of Lean Metrics (indicators that are actually part of Lean) can be found. In the
bottom right-hand corner of Fig. 4.10 a couple of teams that are responsible for
reaching annual KPIs are listed. For each annual goal, the team has to fill out a new
registration form known as the Team charter, which discusses and pinpoints the
actions needed to reach the target. Figure 4.11 illustrates one of these forms, in this
case regarding the goal of reaching a waste/turnover under 0.8%. When observing
the X-matrix it becomes clear that this goal comes from the deployment of the goal
INTELLIGENCE REPORT – 4
Competitive information report Theme: Department of Diagnostic Imaging 
– Reducing average time of reports
OBSERVATION AND DATA ANALYSIS
The length of time for reports depends mostly 
on the type of service requested:
30 min for x-rays;
1 day for TAC;
2 days for other specialist diagnoses.
The data of the past three years shows a stable 
trend with slight increase in the length of time 
needed for specialist diagnoses. 
Specialist diagnoses were, until four 
years ago, always carried out by other 
health services. Basically, patients were 
regularly sent to other regions to perform 
checks. The investments of the past three 
years made it possible to import the 
knowhow into the simple and complex 
structures of the department, but the 
problem is mainly the lack of human 
resources (2 members of staff) and their 
training regarding the use of the 
equipment. 
IMPLICATIONS FOR THE BUSINESS
Resources for specialist diagnoses need to 
be increased (to at least 3), improving 
their training at the construction 
company. There is a high risk of not 
reaching the regional targets of health 
service standards of the next three years. 
Fig. 4.9 Intelligence report regarding the department of a hospital company
60 4 Strategic Planning: Hoshin Kanri
that involved improving EBIT by 1%. In the registration form of Fig. 4.11 the team
called Six Sigma, often involved in these projects, analyzes the current situation
and basically pinpoints the mistakes linked to lack of order and cleanliness, or a
critical trait like viscosity which is not under control.
The Action plan indicates how a 5 S Kaizen workshop or a SMED could improve
the situation together with long-term Six Sigma projects based on statistical
techniques and the introduction of TPM. This project is part of the Six Sigma
world because it involves gathering data on plant failures, a statistical analysis on
their distribution and a subsequent definition of preventive programs. This is an
improvement project among the Kaizen workshops, which is discussed in the
following chapter.
Fig. 4.10 A3 X-matrix
4.2 Lean: A First Warning 61
TEAM CHARTER
Proposed Team Charter Team: Six Sigma team
STATEMENT PROPOSED ACTIONS
Reducing waste in production lines
Improve CTQ implementation on the process. CPK 
relatively is low, at 0,8%. 
In mixing, 5S needs to be implemented with the help of 
a Kaizen Team. The plant also needs Total Production 
Maintenance (TPM) and a quicker change of format.
TARGET STATEMENT
Waste value/turnover*100 < 0,8%
IMPLEMENTATION PLAN
Action Responsibility Time
5S order and cleanliness 
in mixing
Kaizen Team Kaizen week
Viscosity improvement 
through X-mR control 
chart
Six Sigma 
Team
3 months
TPM plant Six Sigma 
Team
8 months
SMED plant Kaizen Team Kaizen week
ANALYSIS
CHECK AND ACT
Waste in Department 4 (which 
contains a first mixer, a few process 
operations and final packaging) is 
relatively high compared with other 
departments (1,4% average 200x). 
By layering waste it becomes clear 
that there is waste both after the 
mixer and after the process (in 
similar percentage: 0,6% and 0,8%) 
but virtually nonexistent after 
packaging at 0,001%. The waste in 
mixing is linked to errors in 
manually added components (certain 
additives) and the lack of order and 
cleanliness. The processes do not 
keep all parameters under check, in 
particular viscosity (CTQ). 
March, check action progress
April, check progress and report closing action 
documents; evaluate the implementation on other, 
closure of 5S, SMED and report
September, closure and TPM report
Day-by-day spare line check 
Fig. 4.11 Team charter
62 4 Strategic Planning: Hoshin Kanri
Chapter 5
Kaizen Workshops and How to Run Them
One step at a time is enough for me
Mahatma Gandhi
5.1 Introduction
Kaizen workshops are swift events managed by specific teams for improvement that
strive to identify waste in the timespan of about a week. In advanced organizations
where Lean, Six Sigma and other TQM organizations rule, teams that strive for
continuous improvement are usually organized into two different categories
according to the target that has been set. These two categories are usually the
following:
• Teams that focus on rapid waste reduction, and focus especially on reducing
value stream lead time.
• Teams that focus on reducing the variability of processes and on improving
quality.
This chapter discusses the first type of team, their organization and the methods
they use. The methods will then be explained in detail in the following chapter.
5.2 Introducing Lean Kaizen Workshops
Lean Organization is mostly based on quick improvement projects called Kaizen
workshops or Kaizen events. Launching a Kaizen workshop, especially in an
organization that has never made use of improvement teams, can lead to enormous
benefits in terms of reducing the seven wastes, thus regaining efficiency. Even
a simple 5S workshop, which focuses on order and cleanliness of workplaces,
can immediately help reduce activity time, free up space, improve ergonomics
and safety at work, which all contribute to improving staff satisfaction. In any case,
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_5,# Springer-Verlag Italia 2013
63
companies can use different kind of teams, depending on the target they want to
achieve. Figure 5.1, for instance, sums up the most important team used for
different types of improvement targets.
As Kaizen spreads out across the whole organization, the organization starts
using ever more complex methods to improve the whole Value Stream.
The Value Stream is made up of all the processes and activities that the organi-
zation needs to design, develop or produce the service, deliver the product to the
customer, offer assistance, and so on.
Kaizen means adding value and reducing waste in the entire Value Stream.A Kaizen workshop is the activity of a team that strives to swiftly reduce waste
in a specific area. The speed of the operation is the main element that distinguishes
a Kaizen workshop and is its key to success.
Improvement 
target
Type of team Management of the event Targets
Stabilizing the 
process and 
reducing 
variability 
Six Sigma or 
Long-term 
Project
Teams that are very 
familiar with managing 
and statistics manage these 
events; typical teams 
include Six Sigma 
DMAIC or PDCA, which 
usually concentrate on 
long-term projects 
(projects that last from 3 
to 18 months). 
Defining the traits crucial to the 
process (for example waiting time
or ppm defects) that need to be 
targeted in terms of savings. 
Linking projects to the annual 
Business Plan targets. 
Reducing 
process/activity 
waste
Kaizen 
Workshop or 
Kaizen Event
These events are managed 
by teams familiar with 
Lean tools (5S, SMED, 
Group Technology, U-
cells, Poka Yoke, Kanban) 
and do not necessarily 
need to be specialized in 
managing and/or statistics. 
Typical Kaizen workshops 
last around a week (full 
immersion) and up to 10 
working days.
Single workshop targets are not 
accurate. All the workshops 
together should lead to achieving a 
Business Plan goal. 
Quick solution 
for 
waste/problems
Rapid Kaizen 
Workshop 
These events are managed 
by two to three members 
of staff familiar with Lean 
and quality management. 
They reduce activity waste 
by swiftly applying either 
5 WHYs or Problem 
Solving. These workshops 
are not planned ahead and 
do not last longer than a 
week. 
Workshop that deals with problems 
that occur. Their target is to keep 
costs of poor quality to a minimum.
Fig. 5.1 The types of teams for improvement
64 5 Kaizen Workshops and How to Run Them
Working swiftly on waste is vital because:
• It avoids higher costs further down the line (e.g. nonconformities that may
eventually reach the customer).
• It raises awareness among staff regarding the concept of waste.
• It helps the whole organization understand that reducing waste has priority over
every other project, even if production or service needs to be suspended.
Regarding this last point, many organizations believe that production must never
be slowed down for whatever reason. Producing products and service at any cost
can lose customers due to later complaints. The following example illustrates
precisely this point.
Example of Incorrectly Managed Waste. A manufacturing company lived in
fear of losing orders and worked with machines kept without maintenance; big oil
leaks were stopped with stoppers of sawdust and every day little problems had to be
fixed.
Stopping to fix the machine was out of the question because too many orders
needed to be processed. The person in charge of production made the brave decision
to stop production for a week, the time necessary to carry out a Kaizen workshop.
After this operation, the machine’s performance improved in speed by 30%,
making up for the week lost in no time at all and reducing lead time considerably.
Before introducing a Kaizen workshop, the area and problem need to be
selected, a team needs to be elected, the event has to be programmed in hours
and the targets need to be set. Setting targets is a vitally important task, often
neglected by many organizations. As has been explained in the previous chapter, a
Kaizen workshop needs to be linked to strategic targets and has to produce
measurable results. Reducing time, waste, nonconformities, and so on are all
goals that need to be reached, producing economical financial results that are then
brought to the attention of managers through reports. In regards of this, a lot can be
learnt from studying the American Six Sigma model, where projects that have been
brought to conclusion receive certification regarding not only the targets reached,
but also the economical results obtained. However it is important that the Kaizen
workshops, due to the fact that they are so swift, do not strain for results that are
right on target. In fact, one of Kaizen’s main principles is to not immediately strive
for perfection, and rather be satisfied with results that roughly coincide with those
that have been set. Obviously this is not an excuse to launch Kaizen workshops “just
because”: a classic error made by many companies that is often thanks to a
consultant who tries to sell Kaizen events left, right and center. Also, rough results
are only satisfactory in the very first workshops; the next ones should then use the
previous results as guidelines for improvement.
In the following paragraphs the three main stages of a workshop will be
discussed:
• Programming and preparing the event;
• Carrying out the event;
• Presenting the results, celebrating and preparing the follow up.
5.2 Introducing Lean Kaizen Workshops 65
5.2.1 Programming and Preparing the Event
A Kaizen workshop can be carried out in multiple areas, processes, activities,
offices, machines, and so on. The first stage, in fact, concentrates on choosing a
specific area. As has already been explained in the previous chapters, VSM and the
targets set by the senior management define where the first Kaizen workshops
should be applied. This decision is usually quite easy, especially at the beginning
of a Lean project. For instance, in the public sector where everything works quite
well, except for the elaboration of procedures in the back-office, it is quite clear that
this type of waste needs to be dealt with immediately. Or for example in a well-
organized workshop, in which in a lot of WIP gathers in some cells waiting for
certain machines, here one needs to concentrate on the machine itself.
Common sense dictates that to start off, an area that can produce good results
with relatively low effort should be chosen; naturally these results should be in line
with the targets. The reason for this approach lies in the fact that every event will
improve knowhow and thus make each subsequent event easier to perform. For
example, before introducing SMED in a unit it would be appropriate to apply a 5S
workshop first to organize the equipment needed.
To achieve good results quickly, particular focus should be on processes:
• With evident and high WIP;
• That contain activities that also feature in many other processes;
• That present bottlenecks or other big obstacles in the flow;
• That are badly organized;
• That cost a lot and have a high impact on customer satisfaction;
• That present operational or technical problems that are not linked to organiza-
tional management.
It is also better to choose a product-service that:
• Is sized medium to large;
• Has a relatively simple value stream;
• Is completed within a singular process without involving others, specially not
from outside (e.g. products in outsourcing processed by suppliers).
When choosing the first workshops, it is important to check whether the workers
involved wish to make changes and feel ready to experiment a bit.
Finally, it is better if the workers are familiar with improvement methods and
have already been part of similar teams.
So, having chosen the area/process, the type of waste plaguing the area has to be
identified. In Chap. 3 we explained how organizations use specific checklists to
measure the relevance of the type of waste in the process being studied to then
reduce it. Experience has shown that, especially at the beginning of a Lean
implementation, for the reasons that have already been listed regarding improving
knowhow, one of the first workshops to be applied could be a 5S workshop. This
method, as will be explained in more detail in Chap. 6, is simple and allows worker
665 Kaizen Workshops and How to Run Them
to focus on their area, the one they know best, obtaining fairly interesting results in
short periods of time. The “soft” and “hard” results that can be reached using 5 S are
basically:
• Regaining room on workspaces;
• Improving order and cleanliness;
• Introducing Visual Control and Visual Management;
• Reducing operation time;
• Improving workplace ergonomics;
• Increasing safety for workers;
• Introducing Lean strictness;
• Improving competence and awareness regarding Lean.
5S also allows workers to concentrate only on their workplace, thus saving them
from criticism in case of failure. Finally, after having installed 5S at the workplace,
workers and their managers start thinking according to Visual Management logic.
After having applied 5S with success, in fact, it is usually much easier to spot WIP
of activities or obstacles that were hidden by the mess swept away by 5S. It is
important to remember, however, that:
5S represents the discipline and strictness that lie at the heart of Kaizen:
If 5S fails to be introduced properly there’s no point in going on, because the company
isn’t ready for the long way to improvement.
5.2.2 Choosing Team Leaders and Team Members
Every team for improvement, since the dawn of organizational theories, needs
a team leader. The team leader chooses all other team members, prepares and
programs the event, manages it, faces all problems that occur, and defines the
support reports. The team leader is also the connection between the team and
management, discussing results, communications and decisions with both parties.
Organizations that have managed many Kaizen workshops teach us that, against
common belief, the team leader should be an outsider regarding the process
involved; an external leader will be able to question the process with more impar-
tiality and independence and will find communicating with other team members
easier. Often the leader is chosen from among the management of “customer”
processes further along the line, or “supplier” processes further back in the chain,
to bring in a new point of view. The team leader is the most important person in
Kaizen workshop management; Fig. 5.2 lists a few of the traits a good team leader
should possess.
Choosing the other team members is among the main responsibilities of a good
team leader. The amount of team members mostly depends on the type of problem
that needs to be solved and the type of organization. Experience dictates that four
team members are usually able to reach targets when managing simple workshops
5.2 Introducing Lean Kaizen Workshops 67
in small organizations. An ideal team should however be made up of five to
a maximum of 10 members, minding that:
• At least two members should come from the area the workshop is working on;
this is because they know the process and can thus answer questions asked by the
team.
• Two or more should come from processes before and after the process in
question (customers and internal suppliers).
• Often experts, such as maintainers, designers, IT managers, consultants, and so
on can come in handy.
• The team obviously also has to work together, so choosing members that work
well together can be of great advantage.
At the beginning of a Lean system many organizations also include managers of
various departments in the Kaizen workshop, raising awareness regarding:
• Kaizen workshops are not only carried out by workers (this is important in
manufacturing).
• Problems need to be solved where they come from, not in the office.
• Lean is also applied to administrative processes, accounting, technical organiza-
tion, suppliers, and so on (Lean Office), thus moving towards a real Lean
Organization.
Before facing a Kaizen event, the team obviously needs a certain level of
training.
Traits of team leaders 
Is authoritative but not bossy.
Knows how to be decisive and firm where needed, but also friendly and 
upbeat.
Is present directly in the workshop, not in the office.
Has basic knowledge regarding how to manage a group.
Has already managed other teams; possibly also has experience in 
managing groups outside the business, for example social groups like 
scouts, a my and other organizations (including family), and so on.
Already has experience managing another Kaizen workshop.
Is aware of and believes in Lean, TQM and Six Sigma methods.
Fig. 5.2 Traits of a good team leader
68 5 Kaizen Workshops and How to Run Them
This training is usually part of general training for the whole organization (see
Fig. 5.3).
The team leader also needs to develop competences regarding managing
workshops: how to program and develop them, and how to manage the necessary
resources (material, equipment, multimedia support, etc.).
5.2.3 Carrying Out a Workshop
Having defined the area that should be focused on, the team leader, the team
members and the necessary resources, including specific Lean training, the team
leader can start defining the workshop agenda. Kaizen workshops, as has already
been mentioned, usually do not last more than a week; notwithstanding, it is
important to prepare a simple agenda (possibly avoiding Gantt complexes typical
in projects that last longer like Six Sigma DMAIC) with the activities divided into
hours.
Figure 5.4 illustrates a typical agenda prepared for a 5S workshop that lasted
around 4 days.
This sheet is also an effective checklist because it allows team leaders to check,
by consulting the last column, whether the activity has been carried out. The Kick-
off meeting is among the very first activities that need to be carried out during the
Kaizen workshop; the team leader explains the goals of the workshop and discusses
responsibilities and times with the other members. Time is especially important
since the area is shut down during the workshop so activities cannot exceed allotted
Level of organization Type of training
Executive, senior management Strategic advantages of applying systems for excellence
Lean, Six Sigma and Business Plan
Value Stream Accounting and Lean Metrics
Managing Dashboards and Management Reviews
Middle management Lean methods for removing “Muda”, VSM, QFD, methods for 
quality, problem solving, and so on
Team building and team efforts
Managing short-term indicators
Day-by-day improvement
Operative teams General Lean training; 7 wastes in processes
Details regarding specific methods used in workshops (e.g. 5S, 
SMED, etc.)
Problem solving
Day-by-day improvement
Fig. 5.3 Training for the introduction of Lean organization
5.2 Introducing Lean Kaizen Workshops 69
5S -Workshop Kaizen Agenda
Activity Who When Done
1. General preparatory activities
1.1 Announce main targets to top management 
1.2 Choose an office for the team 
1.3 Book video camera and camera 
1.4 Book media and other equipment: projector, flipchart, colored sticky 
notes 
1.5 Gather available data: layouts, flow charts, instructions, cycle times, 
defects, and so on 
2. Preparation activities in the workshop area 
2.1 Product provision because the area will be frozen (overproduction) 
2.2 Outline the 5S area visibly; add signs reading “Ongoing Kaizen 
workshop” 
2.3 Flipcharts in the area 
3. Workshop
3.0 Kick-off-meeting regarding the workshop and agenda
3.1 5S training for team
3.2 First meeting on the workstation; collection of data, photos, films, and 
so on 
3.2 First analysis and discussion on data, photos, films, and so on 
3.3 Solution implementation
3.4 Second meeting and results check 
3.5 Discussion on results and possible improvements 
3.6 Preparation of report for management 
3.7 Assign tasks to complete activities thatare still open
3.8 Preparation of a report for the standardization of results in other 
similar areas 
4. Closure and post-workshop 
4.1 Cost/results report sent to management 
4.2 Display “Workshop Well Done!” signs in the area
4.3 Ceremony with management
Fig. 5.4 Example of a detailed agenda of a Kaizen workshop
70 5 Kaizen Workshops and How to Run Them
times. As has already been explained, it is important to remind the team that the
preparation for a Kaizen workshop needs to be continuous, without interruptions,
and that most activities will be carried out in the production area, not in the office.
The team leader should also be a good “work psychologist”, preventing
situations where behavior could slow down or even block the event; to avoid
these situations it is important to create awareness regarding the support of the
whole group because teams may slow down and/or lose team spirit during
the workshop. The team leader needs to know how to react and regain control
over the situation rapidly because outbursts and attitude of various team members
can be the make or break of the whole event. For example, in a company belonging
to the chemical industry, various improvement projects failed due to the continuous
declarations of a shift supervisor that he or she did not believe in those projects.
Figure 5.5 sums up the statements that the team should avoid at all cost during
the event because they destroy awareness and team spirit.
Examples of How to Improve Team Spirit. The team leader of an English
multinational company, for example, imposed a £1 fine for anyone who uttered any
of the phrases listed in Fig. 5.5 during workshops. At the end of the workshop, the team
spent a lively evening in the pub with the fines gathered, thus improving team spirit.
5.3 Gathering Data
The data-gathering stage is carried out in the area where the Kaizen workshop will
take place; it varies according to the type of waste and process. The team will need
cycle times, lead times, activity times, waste, nonconformities, and so on to start
analysis and thus improvement.
To help visualize the process where the Kaizen workshop will take place, it
could be useful, at the beginning, to draw up a Value stream map or a Makigami.
Typical sentences that need to be avoided during a Kaizen workshop
- Try to do this on your own.
- Here we've already improved everything, there isn't any waste left.
- I'm sorry, I'm busy.
- This isn't my job.
- We'll never manage.
- This can't work.
- We're already working well, we don't need to improve.
Fig. 5.5 Typical sentences that need to be avoided during a Kaizen workshop
5.3 Gathering Data 71
VSM also makes it possible to outline waste and visualize the improvements
already obtained thanks to Lean. This map is also frequently used for the whole
establishment, office/department, service/product, and process, thus the area the
workshop works on seems merely a subset of a much larger setting.
To gather data in regards of the processing of single operations within a process,
the Kaizen team may also use a data-gathering sheet known as “Operation analysis
table” (see Fig. 5.6).
This data-gathering sheet has been used for decades by Toyota and many other
Lean organizations; it exists in various modified versions, although the traditional
one (if it does indeed exist) uses the symbols below illustrated.
Symbols used in Lean data-gathering sheets
○ ¼Work
(operation that
creates added
value for the
customer)
�¼Worker’s
movement
● ¼ Transfer ▾ ¼ Hold-up, wait � ¼ Inspection
○ ¼Work
(operation that
creates added
value for the
customer)
�¼Worker’s
movement
● ¼ Transfer ▾ ¼ Hold-up, wait � ¼ Inspection
The symbols of the box above help a Kaizen team to concentrate, immediately
and intuitively, on the operations that actually add value to the product/service, thus
defining those that represent waste. Figure 5.6 shows how a Kaizen team used the
symbols to gather time and distance data regarding an area involved in a Kaizen
workshop (left-hand side). The data was used for a subsequent analysis and
improvement implementation, illustrated on the right-hand side of the table.
The Spaghetti chart is an emerging mapping method: this chart helps map routes
of codes and product families, rather than those of documents or people in service
within the workplace. Figure 5.7 illustrates a spaghetti chart that focuses on a
product code of the electromechanical sector but it could also be used, for example,
to map a patient’s route through the hospital when waiting for an operation, rather
than the route the same patient has to take to have a specialist examination.
Spaghetti charts prove to be very useful when attempting to reduce waste in
terms of movement.
The team can also use different methods, such as photos or videos, to those
mentioned above to efficiently gather information regarding the area.
Nowadays most mobile phones can take photos of acceptable quality, and video
cameras produce files that computers can work on easily. Photos become important
because they can show the improvements produced by the Kaizen workshop.
The photo in Fig. 5.8, for example, shows the amount of space gained thanks to
a swift Kaizen workshop that only lasted 3 days and made use of the 5S method
(see Chap. 6).
72 5 Kaizen Workshops and How to Run Them
5.4 Analyzing the Data Gathered and Implementing Solutions
The workshop team analyses the data as has been explained in the previous chapter.
This time of analysis will probably be one of the few times when the team gathers in
a meeting room; the meeting room should not be too far away from the area, and at
Fig. 5.6 Activity analysis worksheet
5.4 Analyzing the Data Gathered and Implementing Solutions 73
best would obviously have a direct view of the area. The walls are then plastered
with value stream maps, information, data, photos, and so on (see Fig. 5.9), and the
team leader collects all other documents that could be useful when analyzing waste.
At this stage of the meeting, other data can be collected by viewing step-by-step
videos of the operations: usually information regarding times and how the activities
work. The team then enters the delicate stage that involves finding causes of waste.
The methods of brainstorming most often used come from traditional quality
management and include:
• Cause-effect and fishbone diagrams;
• 5 WHYs;
• 8D problem solving.
Occasionally, a team may have to use statistical methods to check, for example,
the correlation between factors and results, or to understand the distribution and
frequency of data. In these cases, methods that concentrate more on the mathemati-
cal and statistical aspects may be used:
• Correlation diagrams;
• Frequency histograms;
• Design o experiment (DOE);
• And so on.
Fig. 5.7 “Spaghetti” chart
74 5 Kaizen Workshops and How to Run Them
It should be mentioned, however, that these “advanced” methods require basic
training and they also often require implementation, which could increase work-
shop length.
The main goal of a Kaizen workshop is to reduce waste as quickly as possible,
usually also involving the workers of the area. For this reason, “advanced” methods
are usually only applied in Six Sigma projects, where the main goal is to stabilize
and reduce variability of process and product/service traits.
In the data analysis stage, the team may also use flowcharts to list the possible
causes of waste next to the possible solutions. Cause-effect diagrams and 5 WHYs
are the methods used the most when analyzing waste causes; these can be quickly
consulted if they are drawn on large sheets of paper taped to the meeting room orworkshop area walls.
The steps used by 5WHYs are usually:
• Announcing the waste to the team, being as precise as possible when describing
the problem.
Fig. 5.8 Photos taken before
and after a 5S Kaizen event
5.4 Analyzing the Data Gathered and Implementing Solutions 75
• The team ponders the cause of waste for this first time, and then writes the
explanation under the problem description.
• If the explanation does not immediately identify the cause of waste, then step
two is repeated.
• Step 3 is repeated as often as necessary, until the real cause of waste is
unearthed.
The 5 WHYs method is usually used together with a cause-effect or fishbone
diagram, both methods used a lot in TQM and Six Sigma.
Example of a 5 WHYs Application. In an airport the waiting time for security
checks was increasing on a monthly basis, even though the amount of passengers
remained fairly constant. A Kaizen team decided to launch a workshop with the
specific target of reducing these times. For one whole day times were recorded and
the activities were filmed and photographed. When viewing this material, the team
realized that the member of staff who checked the luggage on screen took a lot of
time identifying objects within the bags, sometimes even having to recheck them.
By combining the cause-effect diagram with the 5 WHYs method, the team
identified the cause of the problem in three steps.
Fig. 5.9 VSM drawn up during a Kaizen workshop using sticky notes and sheets of paper
76 5 Kaizen Workshops and How to Run Them
Explaining the problem
– The member of staff needs a lot of time (up to 4 min) to identify the objects in the
bags
1. Why?
– The monitor brightness isn’t great, it could be either the monitor itself or the
surroundings. . .Team discussion: the monitors are among the best on the mar-
ket, but the brightness isn’t very good; maybe something else reduces it
2. Why?
– The monitor’s brightness is reduced by the monitor behind it. . .Team discussion:
the monitors behind are information boards for passengers and they don’t seem
to be that bright; but they are also used to display ads
3. Why?
– Ads are much brighter than the information for passengers
Once the causes of waste have been identified, the team proceeds to remove
them. Kaizen workshops are simple and quick events, thus removing projects
should be planned and carried out swiftly. Action implementation usually only
takes a few hours (moving a workplace, printing signs, and so on) and thus
documentation should also be pretty “lean”. The checklist in Fig. 5.10, for example,
is a simple registration used both in the analysis and in the improvement action
implementation stage.
The team should assign to each activity a level of waste after having analyzed the
data collected at the beginning:
1 ¼ low waste;
2 ¼ limited waste;
3 ¼ relevant waste;
4 ¼ very high waste.
Waste level 1 does not mean zero waste according to the improvement principle
that there is always room for improvement.
The improvement gained is then, once again, measured on a scale of one to four:
1 ¼ no improvement;
2 ¼ limited improvement;
3 ¼ significant improvement, however not reaching the target;
4 ¼ improvement right on target.
The last column briefly sums up the actions the team must take to remove the
causes. The points assigned for improvement help to check the efficiency of the
whole workshop thus leading to the final inspection, result presentation and cele-
bration stage.
5.4 Analyzing the Data Gathered and Implementing Solutions 77
5.5 Final Check, Results Presentation and Team Celebration
Workshop closure means that the team has to check the results obtained. At this
stage the team leader usually tests the efficiency of the results together with the
team, collecting new data in terms of times, spaces, defectiveness reduction and so
on, using the methods explained earlier once again (VSM, photos, videos, etc.).
As has already been explained, at the beginning the team does not necessarily
have to reach targets fully; the team first and foremost has to learn how to manage
workshops and how to use Lean methods.
The team leader prepares an end of workshop report that describes the benefits
gained and the costs; Fig. 5.11 illustrates an example of such a report.
The compilation of the results in terms of saving usually requires approximate
evaluations, since traditional analytic accounting does not work with savings such
as space gained, WIP reduced, handling and even the improvement of product/
service quality. Occasionally organizations of excellence that use the same type of
report as the one illustrated in Fig. 5.11 submit the report to an inspector who then
checks and certifies economical-financial results. Anyhow, it is vital that the team is
celebrated for the results, which should be brought to the attention of the whole
organization.
The final moment of celebration thus includes the presentation of data and
results brought by the Kaizen workshop. The last day of the workshop, or immedi-
ately afterwards, the team prepares a presentation, for example using PowerPoint,
that:
• Presents the team and team leader;
• Presents the Kaizen workshop, the area/product/service involved and the period
of time it took place;
Waste identification checklist
Workshop Kaizen n°: Area: Date:
# Activity/
Operation
1 2 3 4 5 6 7
A
m
ou
nt
 o
f 
w
as
te
Im
pr
ov
em
en
t 
ob
ta
in
ed
Improvement 
actions and 
comments
O
ve
rp
ro
du
ct
io
n
In
ve
nt
or
ie
s
H
an
dl
in
g
D
ef
ec
ts
W
as
te
 w
it
hi
n 
th
e 
pr
oc
es
s
W
or
ke
rs
’ 
m
ov
em
en
ts
D
ow
nt
im
e
Fig. 5.10 Actions and waste checklist
78 5 Kaizen Workshops and How to Run Them
• Illustrates the problem and the situation before the Kaizen event;
• Shows photos and data of before the event, possibly using VSM, spaghetti
charts, and so on;
• Illustrates the initial improvement target;
• Comments on the actions taken by the team;
• Describes the results;
• Shows performance indicators, photos, new VSM and spaghetti charts of after
the event;
• Comments on the Kaizen workshop report and economical-financial results;
• Collects questions and suggestions;
• Discusses the possibility of continuing in other areas.
Workshop Kaizen Tollgate 
Site: Area: Team 
leader:
Indicator Start Target Post
Space (m)
Inventory/WIP
Distance covered by workers
Handling material
Lead time
Quality
Productivity
OEE
Set-up
Considerations on savings, economical-financial 
quantification of the event:
Total team hours: Total team cost:
Consultants/trainers: Total consultants/trainers 
invoice: 
Suppliers: Total suppliers invoice:
Date: Inspector:
Fig. 5.11 Benefits/costs report at workshop closure
5.5 Final Check, Results Presentation and Team Celebration 79
This presentation needs to be seen by senior management and, especially if Lean
has only just been applied, by the highest members of the organization. It plays an
important part because it gives importance to the event and increases awareness
regarding Lean methods and potential in the whole organization. Finally, according
to the commitment already expressed, senior management has to organize the next
workshops, which obviously strive to achieve goals discussed in the business plan
(topic of the previous chapter). This is usually the biggest challenge because many
organizations launch Kaizen workshops without precise strategic planning, often
because it was requested by a customer, but often even just to try something that
seems to be “in fashion” to then be able to boast aboutmodest results at the next
conference. The real road to excellence is, obviously, a road that never ends, made
up of a strong and continuous belief in improvement.
Bibliography
Harvey, J.: Match the change vehicle and method to the job. Qual prog ASQ 37, 41–48 (2004)
Laraia, A.C., Moody, P.E., Hall, R.W.: The Kaizen Blitz: Accelerating Breakthroughs in Produc-
tivity and Performance. Wiley, New York (1999)
Manos, A.: The benefits of Kaizen and Kaizen events. Qual Prog ASQ 59, 581–591 (2007)
Mika, G.L.: Kaizen Event Implementation Manual. Society of Manufacturing Engineers,
Dearborn (2006)
Ohno, T.: Toyota Production System Beyond Large-Scale Production. Productivity Press,
Cambridge, MA (1988)
Productivity Press Team: Kaizen for the Shopfloor. Productivity Press, Portland, OR (2002)
80 5 Kaizen Workshops and How to Run Them
Chapter 6
The Main Methods of Lean Organization:
Kanban, Cellular Manufacturing, SMED
and TPM
There’s no need to fear or hope, but only to look for new
weapons.
Gilles Deleuze
6.1 Introduction
The main types of waste in organizational processes were analyzed in Chapter two;
overproduction and inventory, for example, are types of waste typically found in
manufacturing, as many leading organizations that have adopted Lean Organization
can confirm. To reduce the seven wastes an organization must create, within the
value stream itself, a pull system: a system that produces the same amount of
products at the beginning of the process as are requested at the end of it. Basically,
the main target of pull systems is to produce the amount of products the customer
demands at the right moment. The principle that fuels this system is that the
customer “pulls” the products through the value stream with orders, thus avoiding
“pushing” the products towards the customers through predictions by the organiza-
tion itself.
The following sections will, after a brief introduction on pull systems, illustrate
the basic methods an organization should use to eliminate waste within a Kaizen
workshop and create “pull” in the whole value stream.
6.2 Pull Versus Push
The pull system is the exact opposite of the traditional push system, which consists
of pushing products through the value stream by using production programming
based on demand prediction. Without focusing too much on these particular
methods, we will say that they were adopted in the 1970s and later known as
Material Requirement Planning (MRP). MRP type 1 is of infinite capacity; MRP
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_6,# Springer-Verlag Italia 2013
81
type 2 is slightly more evolved and matches resources to the goal of synchronizing
stages and reducing inventory. The product is divided into sets, subsets and
components; orders are then placed according to precise and slightly overestimated
lead times. This attempt is often thwarted by varying customer demands and
internal and suppliers’ waste. Believing that lead time never varies and that costs
are always the same surely cannot help when introducing the concept of continuous
improvement and waste reduction. Once lead time and standard costs have been
defined, the whole process puts its’ trust into an algorithm that places orders
according to customer orders and predictions. Intermediate and final inventory
soften prediction errors and reduce the impact of fluctuations.
By contrast, pull systems are not based on predictions; they tend to pull the value
stream flow with orders. Pull systems, as will be explained in the following
chapters, use a tool within the value stream that links all the processes from start
to finish. This tool, intrinsically linked to takt-time, is the so-called Kanban. To
apply this Copernican revolution, two big targets should be introduced:
• Reducing lead time and inventory;
• Quality without defects.
Many methods can help achieve these goals, among which are:
• Processes always under check;
• Quick set-up times;
• Reliable suppliers and partners;
• Reliable and efficient machines and plants;
• Modular products and component reduction;
• Specially designed layout;
• Awareness and participation of all members of staff;
• Waste elimination in all offices, including those not involved in production
(Lean Office).
Figure 6.1 sums up the main differences between the pull and the push systems
and the relative consequences to main processes.
In Sect. 6.2, the main methods to introduce pull logistics to the value stream will
be explained, starting off with simple but important basics: order and cleanliness in
workplaces, a vital necessity when introducing Lean.
6.3 5S Order and Cleanliness, the First Step Towards
Introducing Visual Management
The 5S method is applied to obtain and maintain order and cleanliness at work. The
name comes from the initials of five Japanese words: seiri, seiton, seiso, seiketsu,
and shitsuke. The 5S method makes the following possible all at the same time:
increasing productivity; improving quality, safety and security; and introducing the
82 6 The Main Methods of Lean Organization
basic principles of Visual management and control. Many companies, in fact,
become aware of WIP, badly organized spaces, pointless journeys workers take,
possible sources of defects and so on during or after having applied 5S. The benefits
obtained thanks to 5S are measured by using the following indicators:
• Productivity;
• Amount of space gained;
• Defects;
• WIP/lead time;
• Accidents and injuries.
Seiri means “choosing and separating”, namely choosing the useful activities
within a process and separating them from the useless ones; subsequently
removing everything that is not useful to the process from the area. This reduces
defects and interferences to the value stream, thus improving quality and
productivity.
Seiton means “tidying up”, in this case tidying up tools, equipment and every-
thing else that is used during the process, including unfinished products; this
makes it easier and quicker for the workers to find and use what they need.
Seiso means “to clean up”, namely keeping the area clean.
Push Pull
Inventory Spares are tolerated so as to have 
more safety in case of prediction 
errors, so as not to reduce customer 
service.
The target is to eliminate spares 
completely.
Quality Target of zero defects: checks and 
tests are the best filter.
Target of zero defects, no compromises: 
checks and tests do not add value to the 
product, they just slow down the flow.
Six Sigma quality with continuous removal
of causes of defects at their source.
Suppliers Certified suppliers,good quality and 
free-pass, suppliers compete with each 
other on prices.
Maximum reliability of suppliers in terms 
of quality and delivery. Implemented 
Kanban and free-pass. Supplier is partner 
in both product and process design.
Lots Purchase and production in 
“economical” lots.
Purchase and production of lots in the 
quantity and mix requested. Kanban system
throughout the whole value stream.
Lead time Tends to be constant. Delivery times 
force it to abide to MRP, not the 
customer. If a customer is “urgent”, 
another one will be late.
Continuously under discussion. Reducing
lead time means reducing WIP and 
improving delivery performance.
Fig. 6.1 Push and pull and their impact on main management processes
6.3 5S Order and Cleanliness, the First Step Towards Introducing Visual Management 83
Seiketsumeans “to standardize”, in this case making instructions and application
easy and simple for workers and supervisors to understand them. However, the
area needs to be kept clean and tidy according tothe previous steps, which may
have to be repeated to maintain order.
Shitsuke means “to sustain”, namely making sure that the company is able to
maintain and improve the order and tidiness achieved. A certain strictness and
discipline is required when applying these procedures because they should
become part of a long-lasting routine.
5S standardizes daily workplace management; because of this, it is a very
suitable method to apply when striving to deploy continuous improvement. The
use of any of the other methods should only occur after a basic 5S application.
6.3.1 Seiri
The first step of 5S requires the workers to choose what within the process is useful
and what is not, and then separate them (seiri). Before introducing Lean, many
organizations battle with mess, heaps of products and unhygienic situations that
could compromise health and safety for workers. Experience shows that:
• Masses of unnecessary equipment cause workers to waste time when looking for
equipment they need.
• Equipment that is not necessary is also waste in terms of maintenance and
management.
• Piles of spare products in the area tend to hide other problems (such as a poor
workforce, unbalanced processes, defects, broken machines, missing equipment,
late deliveries, slow set-ups, etc.).
• Staff that have to work around obstacles (mess and useless materials and
equipment) waste time and cause a decrease in productivity.
• Equipment and materials left to their own fate around the area represent waste
not only when workers struggle to find them, but also when someone decides to
tidy up. The new tidiness cannot last long and will inevitably fall back into mess.
• Mess endangers the health and safety of all members of staff.
• Failing to tidy and clean the area means that mess will continue to use up room.
Many organizations use the three-container method when facing an area that
needs to be tidied up: one container is for useless objects, one is for useful objects
and the last one is for objects shared with other areas that can be stored in the
warehouse. By applying this method 50% of useless objects can easily be removed.
Figure 6.2 shows a photo that illustrates this separation.
The red tag technique can come in handy to identify potential useless objects:
when in doubt regarding certain objects, red tags are applied to them and the objects
are stored together in a designated area. Specific criteria are then set, defining useful
and useless objects, so that after a set period of time the objects under observation
84 6 The Main Methods of Lean Organization
can be classified. For example, at an assembly line, workers can use red tags to
identify objects that they are not sure they are using often and/or if they are of actual
use. These objects are then stored in the area’s warehouse and every worker that
makes use of them writes the area code and date of use on the tag. After one month
the tags are collected and studied; they can then either be assigned to the area that
uses them the most or be discarded. The red tag system is divided into seven stages:
• Training and awareness regarding red tags;
• Identifying objects that need to be observed;
• Defining evaluation criteria;
• Producing the tags;
• Applying the tags to the selected objects, which are then stored in the designated
area;
• Object evaluation according to the selected criteria;
• Result analysis.
The seiri stage, which is developed using the methods described above, is an
excellent way to free up space by removing objects that are of no effective use, such
as broken equipment, inventory, objects that do not belong to the area, and so on.
Having achieved this first step, the next step is to decide how to organize the
remaining useful objects.
6.3.2 Seiton
Seiton means tidying up the area. This stage involves using grids, labels, lines on
the floor, visible signs, codes, and so on. The whole point of this stage is tidying up
the area, assigning each object to a designated area where it can be easily found and
Date:
Reason for 
tagging:
Useful objects
Shared objects Useless objects
Fig. 6.2 Start of 5S, seiri separation stage and red tags
6.3 5S Order and Cleanliness, the First Step Towards Introducing Visual Management 85
placed after use. Simple boxes, grids and colored labels can be of great use, while
keeping expenses at a minimum at the same time; an example of this is illustrated in
Fig. 6.3. In this stage it is, however, important to remember that input/output
products also need to be involved. Materials should not be left lying around because
designated areas, lines on the floor, containers and so on define where the products
and objects should be. Figure 6.4 shows an example of this.
At this stage, a famous Japanese saying should become the new work
philosophy:
A place for everything, and everything in its place.
Identifying where objects have been placed should be immediate, and once again
this leads us to the concept of Visual control. Visual control is achieved when
everybody can instantly understand how the job should be carried out and where the
necessary tools can be found. During the seiton stage the area can also be
reorganized in terms of unnecessary journeys and waiting. Particular focus should
be on:
• Minimizing operations and removing those that are unnecessary or carried out
twice.
• Minimizing movements that involve: workers, the area layout, equipment, tools
and machines.
• Minimizing waiting times within the process.
• Maximizing the use of available resources.
6.3.3 Seiso
The third stage is seiso, meaning cleaning up and maintaining, and it involves
accurately cleaning the area and a first check-up on the methods applied and their
results. Workers and their supervisors need to evaluate the efficiency of the order
Fig. 6.3 Equipment kept in simple foam boxes and on grids
86 6 The Main Methods of Lean Organization
and cleanliness system they have applied, and whether the set targets are being
achieved. Usually checklists are created for this purpose; these checklists list the
daily cleaning and maintenance activities. Alternatively, reports that recap the
activities that have taken place can be used. To effectively check cleanliness and
order, certain standards should be set (for example, 95% of all equipment at its
designated storage place) and responsibilities and methods to achieve and maintain
these standards should be defined. At this stage it is also important to increase
awareness and competence among staff that will then make it possible for them to
keep their area up to standard. To help staff, methods such as suggestion boxes,
Cause and Effect Diagram with Addition of Cards (CEDAC) boards, and boards
that show the development of implemented ideas and prizes for the best ideas.
Finally, it is of vital importance that the staff are not only aware of order and
cleanliness, but also know that each and every member of staff is responsible for
maintaining a clean and tidy area. Daily tidying activities and small maintenance
jobs become of vital importance in the vast scheme of machine maintenance (see
Sect. 6.9 on total productive maintenance).
6.3.4 Seiketsu
Standardization (seiketsu) is the result obtained when the previous stages have been
applied correctly. The main target of this stage is to make sure that what has already
been achieved and verified in terms of order and cleanliness becomes part of a
Fig. 6.4 Lines show where
material will be placed in the
future (supermarket)
6.3 5S Order and Cleanliness, the First Step Towards Introducing Visual Management 87
standard daily routine. In this stage certain procedures and instructions need to be
defined, especially regarding:• Responsibilities;
• Daily activity checklists;
• Times that cannot be exceeded;
• Checks and inspections;
• And so on.
When writing these procedures/instructions (which should then be placed where
everyone can see them), as many images, photos and drawings as possible should be
used, making the document easy and quick to interpret for everyone.
6.3.5 Shitsuke
Shitsuke, the final stage, introduces discipline, making it possible to comply with
the standards that were defined in the previous stages. It is definitely the hardest
stage of all, and basically tests whether the application has been successfully carried
out. Many leaders of excellent organizations have admitted to having had problems
with failures at this stage after a longer period of time. Areas of both manufacturing
and administration where 5S lasted over various months started declining slowly
but inevitably back to square one. The mistakes are trivial, the interviewed
managers explain:
• Conflicting orders from management, for example: “5S are very important, but
we should rather concentrate on finishing this order right now”.
• Habit of applying 5S in times of “peace”: weekends, before bank holidays, times
when orders decrease, and so on.
• Lack of indicators.
• Lack of periodic and systematic check-ups on the development of the method.
Periodic and systematic checks involving checklists like the one in Fig. 6.5
certainly help, since they keep workers under pressure, but what is most important
is obviously a clear and non-contradictory message from management. Most
organizations that apply 5S also carry out regular inspections and then publish the
results in the area.
6.4 The Kanban System
Overproduction, it can never be said enough, is one of the most dangerous types of
waste within a company. Due to continuous changes in the production plan, linked
to a market that is becoming increasingly unpredictable, overproducing is a risk
when subscribing to the just-in-case principle, rather than to just-in-time.
88 6 The Main Methods of Lean Organization
To avoid overproducing, while keeping to the takt-time, Kanban (literally
“label”) is the main method for success. Kanban defines the amount and the type
of products that need to be produced by various processes (see Fig. 6.6). After
having introduced Kanban, excellent organizations saw the following benefits:
Overproduction eliminated;
Increased flexibility in responding to customer demands;
Production in smaller mixed lots;
Simplification of the production’s information system;
Increased process integration, from the supplier right down to the customer.
# Object of evaluation Results
1 = Beyond control
2 = Negative
3 = Incomplete application 
4 = Successful application 
1 Has workplace material been placed in designated 
areas?
1 2 3 4
2 Do codes match the numbers on the containers? 1 2 3 4
3 Have any codes been mixed up incorrectly? 1 2 3 4
4 Has all equipment been placed in the correct grids? 1 2 3 4
5 Are all grids intact? 1 2 3 4
6 No tools should be lying around the workplace 1 2 3 4
7 No irrelevant material/objects should be lying 
around the workplace
1 2 3 4
8 Is the area clean? 1 2 3 4
9 Is the floor tidy (no screws, bolts, etc.)? 1 2 3 4
10 Is the floor clean? 1 2 3 4
11 Are all instructions where they should be? 1 2 3 4
12 Has all daily data been recorded? 1 2 3 4
13 Are workers aware of the information on the board? 1 2 3 4
14 Have all workers made use of necessary protective 
equipment?
1 2 3 4
Fig. 6.5 Extract from a 5S audit checklist
6.4 The Kanban System 89
In the case of two consecutive process areas (for example, two cells), separated
by a WIP, the pull system dictates that the cell at the beginning of the process
should only produce upon request from the cell near the end. Kanban is the method
that makes communication between supplier and customer cells possible. Kanban is
basically the link between two adjoining processes, moving continuously around
the different areas, including those of suppliers of raw and unfinished material.
Kanban is basically nothing more than a work order that moves materials and saves
information regarding production; the work order is based on Kanban labels that list
certain information and are applied to product containers. The pull system is based
on the same principle that guides supermarkets: customers buy the products on the
shelves, which are then stocked up as they empty.
Kanban links processes and cells together to enable coordinated production
according to demand. If Kanban is applied to only a few cells, the waste within
the remaining cells immediately becomes obvious. Workshop teams will then
necessarily have to work on said areas.
Kanban is a visual management system; it abides to strict rules and awareness,
both of which should be introduced during a basic 5S implementation.
6.4.1 Different Types of Kanban and Application Methods
Traditionally there are two types of Kanban:
• Transportation or Movement Kanban, which involves moving products towards
a cell or productive process;
• Production Kanban which is basically permission to produce a certain product.
Transportation Kanban can also be split into two further subcategories:
• Supplier Kanban, which acts as an order to external suppliers;
• Internal Kanban, used to communicate among internal processes.
upstream downstream
Need of 
components for 
the product
Need of producing 
a new product
Need of a 
finished product
Kanban
supplier
Kanban 
production
Kanban 
withdrawl
Supplier Production
Delivery 
department
Customer
Fig. 6.6 The Kanban pull system
90 6 The Main Methods of Lean Organization
The supplier Kanban acts as an order to suppliers, usually components for a
customer establishment (typically assembly lines/cells). The supplier Kanban can
take on various shapes and sizes according to the type of product or process
involved. Figure 6.7 shows a typical Kanban label (the company name has been
omitted).
Internal Kanban connects processes within the establishment, supplying the
information needed to withdraw components from the upstream process. This
type of Kanban is usually involved in assembly processes, both upstream and
downstream. Depending on the product it can be applied in different ways:
• One Kanban per product.
• One Kanban that acts as a request for a container that contains a certain amount
of products with the same code.
• A Kanban-box or Kanban-trolley that delivers products with different codes to
the correct assembly line.
The barcode on the label shown in Fig. 6.7 allows the worker to check whether
the product he or she has removed from the shelves was in the right place (this can
be done by comparing the product’s barcode to the barcode on the shelf): a poka-
yoke (foolproof) system.
Supplier To
Part number and name
Bar-code
Location # Kanban
Container Container capacity
Fig. 6.7 Example of a supplier Kanban
6.4 The Kanban System 91
6.4.1.1 Production Kanban
The production Kanban is very similar to the transportation Kanban; this type of
Kanban acts as a signal to the upstream process to commence production. It works
the same way the previous internal Kanban worked for assembly processes, the only
difference being that it focuses on cells/lines/processes that then produce. When an
internal Kanban requests a component from a cell/line/process, the production
Kanban orders the production of a replacement for said component.
The production order Kanban is similar to the one shown in Fig. 6.8. The
information is the same and can be integrated with drawings, production
instructions or photos to illustrate what needs to be produced andhow. Figure 6.9
illustrates an example of this type of production Kanban.
6.4.1.2 Signal or Triangle Kanban
The signal Kanban is a special triangular Kanban used for plants that are affected
by code changeover. The triangle Kanban is placed where spares are reorganized to
make sure that the downstream process always receives the necessary supplies,
Part number – name: 458 – S4 –
Upper box 25x6
Previous cell:
Container quantity N° Cell 5
Next cell:
20
Type of container Withdrawal 
B
point
3-D 3/4 Final cell A
Fig. 6.8 Example of an internal Kanban
Part number – name: 458 –
S4 – Upper box 25x6
Current 
process:
Container quantity Type of 
container
N° Cell 5
Drilling
Next 
cell:
20
Instructions
Drilling 
diagram 
458-S4-A
B
Deposit 
area
3-D
3/4 Final cell A
Fig. 6.9 Example of a production Kanban
92 6 The Main Methods of Lean Organization
even during changeover. This system originates from push systems, which always
has emergency stock. The triangle Kanban signals a small amount of stock, which
obviously tends to become a small amount of waste. However, this system makes it
possible for processes to stay linked to the takt-time avoiding fluctuations in stock
like those caused by MRP predictions.
The triangle is usually applied to the box or shelf.
In the example illustrated in Fig. 6.10, a lot of 100 pieces (5 pallets of 20
products each) was withdrawn; when the third pallet (60) reaches the reorganization
area, the production Kanban gives the order that drilling may commence. Drilling,
due to the fact the code has changed, needs to be set up.
6.4.2 Calculating the Number of Kanbans
The first problem many Lean organizations have to face when they adopt Kanban is
the amount of labels needed. In the case of production based on standard and
repetitive operations, the following traditional formula should be used:
Number of Kanbans ¼ daily production� ðlead time
þ safety marginÞpallet capacity
In this formula, lead time is calculated by adding up cycle times, possible storage
time and handling time, including the time lost due to retrieving Kanbans. The
safety margin should obviously be as low as possible, and only included when
absolutely necessary (particularly in stable processes). Pallet capacity is inversely
Fig. 6.10 Triangle or signal Kanban
6.4 The Kanban System 93
proportional to the amount of deliveries. When starting to work with Kanban
numbers (however approximate these may be), one should always aim to decrease
them; this can be done by working on the following three aspects:
• Reducing production lots;
• Reducing lead time;
• Reducing the safety margin stock buffer.
Daily production needs to be compared to takt-time to give the frequency of
production necessary to satisfy customer demand. Calculating takt-time is fairly
simple according to the following formula:
Takt-time ¼ daily work hours=daily product demand
Example of Takt-Time Calculation. A customer requires 480 products per day,
the time available daily is 8 h (480 min): takt-time is one product per minute. This
includes all available time, and controls all processes, including external suppliers.
If the last process downstream requires two sets of products, then the takt-time of
the upstream process involved will be 30 s per set.
6.4.3 The Kanban Operating Principle
Kanban has to “pull” products, keeping the process flow tight. In an ideal system,
without WIP between processes, Kanban would be zero. Every process would keep
to takt-time seamlessly, making it possible for all products to be ready just in time
for the downstream process without having to apply labels. Unfortunately, in
reality, the downstream process pulls the product from the upstream process with
the Kanban label, and the upstream process only produces upon receiving a Kanban
production order. Explaining Kanban flow is relatively simple and when it is seen at
work it does not even require further explanation. Unfortunately, most books have
not been very good at describing the basic elements of this system, and most Lean
organizations apply Kanban based on intuition. The simplest description is the one
Toyota offers on its homepage, which can also be viewed in Fig. 6.11.
Let us assume that label “A” is the internal Kanban and that the label with a hole
on the left-hand side is production Kanban. Starting at point 1 on the right-hand
side, we can see a worker removing products from the pallets to use them. Having
emptied the pallet, the worker removes the “A” label from said pallet. At point
2 this label stays with the empty pallet that moves towards the upstream process on
the right. At point 3 it reaches the deposit area of the upstream process, where
another pallet is already waiting with, however, the production Kanban. After
having removed the production Kanban, this pallet moves on with the internal
Kanban label. The production Kanban label is applied to the empty pallet, which
stays in the deposit area. At point 4 on the right the worker returns towards the right-
94 6 The Main Methods of Lean Organization
hand process with a full pallet and the internal Kanban. On the left-hand upstream
process, however, points 1 and 2 involve taking the empty pallet and filling it up with
the exact same amount of products requested by the production Kanban. At point 3
the full pallet with the production Kanban is moved to the deposit area, and so on.
Toyota’s diagram is a simplified version: in a real setting the upstream process
would probably receive requests from various downstream processes and vice
versa. In upstream processes specific production Kanban reception points are
often set up. Workers use this sequence to work on and assemble products. In any
case it is of vital importance that the Kanban label is placed back onto the pallet
after processing (left, point 3), which is then placed in the designated deposit area.
Two basic rules need to be kept when applying Kanban:
• Only one Kanban stays with each container during handling.
• The amount and code on the label has to be the same as the amount and code of
products within the container.
The container involved varies according to the product and the amount; any of
the following can be used:
• Carts;
• Transpallets;
• Pallets;
• Trays;
• Bins;
• Kits;
• And so on.
Figure 6.12 shows a container with an envelope for the Kanban label.
The container deposit area needs to be clearly visible and defined by either
yellow lines on the floor or shelves. This area should not be too big, so as not to
Production 
Kanban 
Withdrawal 
Kanban 
Fig. 6.11 The Kanban system according to Toyota (Reproduced from Toyota’s website)
6.4 The Kanban System 95
attract excessive WIP. The deposit area is also often called supermarket because the
concept can be reduced to that of supermarket shelves. Furthermore, this area
should be close to the productive process. Ideally the supermarket should be
made up of shelves filled with medium-sized boxes (see Fig. 6.13).
These shelves are slightly inclined with rollers, allowing them to supply the cell
or assembly line directly, and are usually placed next to an area where Kanbans are
assigned. Prepared kits with different codes are often stored on the shelves before-
hand to decrease assembly time. In the case of various product codes with a limited
amount of shelves (since the supermarket is already a form of waste), each lane
should apply “first in first out” (FIFO) with different codes: the first container that
enters the lane is the first that leaves the area fully assembled.
6.4.4 Using the “Milk-Run”
Often an extra worker is required to supply the supermarket and manage Kanban.Said worker delivers products to cells/assembly lines, retrieves empty containers
and manages internal Kanban flow, as shown in F11. Traditionally this figure was
called Water beetle or Whirligig, due to the fact that the worker’s movements
resemble those of the beetle. Other names include: Spider-Water, Milk runner
and Milkman. Why? Experience has proved that the downstream process receives
products from more than one upstream process. The worker has to deliver correct
codes and amounts, according to takt-time. The “milkman” enables:
Fig. 6.12 Container with
envelope for the Kanban label
96 6 The Main Methods of Lean Organization
• That process/cell workers do not have to leave the area and waste time looking
for supplies and products.
• That the milkman, specializing in this activity, becomes very efficient, makes
fewer mistakes and increases process speed.
• That by keeping processes at takt-time rhythm, unbalanced processes, obstacles
and bottlenecks can be easily spotted and changed.
• When trained in job enlargement, the milkman can jump in for other workers,
while still keeping takt-time.
6.5 Balancing the Process
Workers have to be balanced among cells/lines/processes to maintain takt-time.
Balancing is vital; having workers waiting or rushing frantically is something that
needs to be avoided at all costs. When balancing a process, the following four steps
may come in handy.
First, to begin, the current state of the process should be mapped and measured
out. Value stream mapping (see Chap. 3) can be used, but often simple flowcharts
that show the activity sequence and times (for example, Fig. 6.8 of Chap. 5) will
suffice. Identifying the cycle time of each activity is vital. Figure 6.14 shows a
typical list of information gained from a cell. The example shows four different
activities; first the products are assembled, and then moved, within the same cell, to
a small press where they are pressed and inspected one last time.
Second, a histogram is drawn together to visualize the cycle times of the
activities compared to the takt-time requested by customers (65 s for the example).
The lack of balance involving transportation T2, which only takes 12 s, is fairly
obvious when studying the example shown in Fig. 6.15.
Third, the amount of workers the cell needs is calculated using the following
formula:
Amount of workers ¼ total cycle time=takt-time ¼ 204=65 ¼ 3:14
Fig. 6.13 Supermarket shelf
6.5 Balancing the Process 97
The result of the example is slightly over three and therefore four workers are too
many. The cell can be redesigned to work with only three workers in a Kaizen
workshop, moving the fourth worker to either another cell or to specialize in the
milk run.
Fourth, the final stage involves redesigning the cell by using a Kaizen workshop.
The underlying target is to reach takt-time dictating full work for each worker.
Many solutions can be applied; the team described in the example chose to apply
U-cells, moving the assembly operation A1 closer to the press M3. Transportation
time T2 was decreased, making it possible for the member of staff working on
assembly to take over this job. Inspection activity C4 was redesigned to stay within
the 65 s required by takt-time. Cycle time was brought down to 192 s with a 12 s
decrease in lead time. If cycle time of C3 could be decreased even more, the worker
could use the spare time to help in upstream or downstream activities. This worker
should obviously receive training to improve ability and competences.
Reducing the number of workers and moving them from one process to another
is vital when leveling out the process because it allows keeping to takt-time when
variations occur. Job enlargement should be used to develop workers’ abilities,
discarding the specialization concept inherited from Taylorism. Two methods that
can be used are cross-training, which involves moving workers to different
machines to receive instructions from experienced workers, and job rotation,
which makes workers rotate and work on different machines. Figure 6.16 is a report
that shows the different training four workers received in the same cell. To begin
with, the worker should be guided by others until capable of carrying out the job
alone; after having gathered enough experience, the worker then acts as an instruc-
tor for beginners. The highest level of training is reached when the worker can set
up and apply total productive maintenance (TPM) without help.
The report shows that only worker number 4 is able to set up and maintain the
press; the other workers need to undergo training.
Assembly Transportation
to press
Pressing Final
check
C/T (Cycle 
time)
60 seconds 12 seconds 62
seconds
70
seconds
C/O 
(Changeover)
0 0 3 minutes 5 minutes
N° workers 1 1 1 1
Total cycle time = 204 seconds
Fig. 6.14 Cell information sheet
98 6 The Main Methods of Lean Organization
Leveling workers and production loads are two vital steps that need to be taken
when introducing Kanban. To level out production loads the organization should
stick to one-piece-flow, which involves working with one product at a time, by
mixing similar products with different codes within the same process. To achieve
one-piece-flow, job enlargement and Heijunka for workers, and production load
leveling can be of great use.
12
A1 T2 M3 C4
10
20
30
40
60
70
50
Current state
60
62
70
10
20
30
40
50
60
70
A1+T2 M3 C4
Ideal state 
takt-time = 65 sec
65 6562
Fig. 6.15 Worker balance histogram
Cell U – S4 activities
Assembly Transportation Press Checkup
Worker n˚ 1
Worker n˚ 2
Worker n˚ 3
Worker n˚ 4
Key
Worker in training Independent worker Worker capable of
training
Setup and TPM
knowledge
Fig. 6.16 Report regarding workers’ abilities
6.5 Balancing the Process 99
6.6 Cellular Manufacturing and One-Piece-Flow
Cellular manufacturing is one of the most efficient production layout rationalization
methods known, helping to reduce various types of waste and moving the whole
organization towards a pull system. A cell is the very opposite of the traditional job
shop or area, which contains a series of similar machines and processes. Tradition-
ally, a product travels several hundred meters within the process, wasting time and
causing a high amount of WIP between different areas. In a cell, however, machines
and equipment are placed so as to avoid movement or transportation of products.
Consider the example of a product family that requires assembly, drilling, second
assembly, cleaning and testing; in this case these stations and their appointed
workers are placed in this sequence in a designated area. The many benefits
obtained include:
• Reducing waste in terms of transportation and workers’ movements;
• Reduction of lead time;
• Saving space;
• Balancing of activities and reduction of production lots;
• Reduction of internal set-up times;
• Elimination of waste causes.
Cellular manufacturing is vital when striving to maintain the flexibility, in terms
of quantity and codes, the customer asks for.
6.6.1 Designing Cellular Management
When designing cellular management, the steps that need to be taken are quite
simple:
• Gathering data regarding codes and their quantity (product-quantity analysis,
P-Q analysis);
• Process route analysis;
• Mapping out single processes in detail (for example, Work Layout Mapping,
WLM), gathering cycle times for every single operation/activity;
• Takt-time and process capacity calculation;
• Activity combined times (ACT);
• Layout modification, creation of the new cell;
• Efficiency check.
6.6.2 P-Q Analysis
When moving towards cellulardesigning, it is important to make an initial evalua-
tion of production. A typical situation involves a lot of different codes, among
100 6 The Main Methods of Lean Organization
which only a few are required in high quantities, whereas the rest are needed in
much smaller quantities. Once the codes and their quantities (on a daily, weekly or
monthly basis) have been recorded, the 20:80 Pareto principle will make it easy to
visualize the situation. The horizontal axis of the histogram illustrated in Fig. 6.17
contains the codes, whereas the vertical axis records the quantities. This histogram
is usually called P-Q analysis; in the example, codes A, B and C (20%) take up
almost 80% of total production. If the company only has to produce these three
codes, this is not a problem. In fact, high amounts would probably be to its
advantage and the low amount of codes would minimize problems, such as set-up
time, within the cell.
Cell types vary but the types used most often are the following two:
• Focused on the product;
• Mixed model.
The first type works best with high quantity products/codes, whereas the second
type, which processes various different codes, especially requires low changeover
times. Furthermore, when striving for one-piece-flow, quality problems and down-
time need to be brought to an absolute minimum. Unstable processes that cause
defective products will lead to failure. Mixed-model cells are obviously the type
needed for one-piece-flow.
2500
PQ - ANALYSIS
2000
1500
1000
500
0
A B C D E F G H I L M M O P Q
Fig. 6.17 P-Q Analysis
6.6 Cellular Manufacturing and One-Piece-Flow 101
The next step, after P-Q analysis, is to identify similar operations that different
codes have in common. A simple method that can be used to achieve this is known
as Cycle Route Analysis. This method uses an intuitive grid like the one in Fig. 6.18
to identify code groups that could be placed within the same cell. The grid shown
analyzes the codes of lower quantity identified in the P-Q diagram, making it
possible to group codes D, E, F and G within a single cell, keeping in mind that
codes H and L could be added too. Between the remaining codes the differences are
too many, making it unlikely for them to be grouped. Codes D, E, F and G thus
become a family of products within the future cell.
Having identified the products for the cell, takt-time for said products needs to be
calculated and compared with the times of the other operations within the cell.
Takt-time is calculated according to the following formula:
• Takt-time ¼ daily available work hours/
• Daily product or service demand
Takt-time is the frequency at which products need to be produced to satisfy
customer demand. Cell time analysis records the length of every process within the
cell and compares it to takt-time. When collecting these data, cycle times of manual
and mechanical processes, loading and unloading of machines, movements of
Cutting
D
Codes Processes
E
F
G
H
I
L
M
N
O
P
Q
Folding Welding Assembly Polishing Final
check
Fig. 6.18 Cycle route analysis
102 6 The Main Methods of Lean Organization
workers and waiting time all need to be taken into account. These data should be
recorded various times over a long period of time not only to calculate an average,
but also to find out the minimum time possible and the conditions that made this
minimum possible. The sheets used to record this information vary from company
to company; Fig. 6.19 shows a typical cell time analysis sheet, in this case used by
an engineering company. The code analyzed in the figure has low capacity in
folding but this has not been modified out of fear of making it a bottleneck for
the whole cell and creating WIP. If the daily request for this product were higher
than folding capacity, then the cell would not be able to keep takt-time.
Once all necessary information has been collected, the cell layout designing can
begin. The cell is usually designed by keeping manual stations and machines as
close as possible so workers do not need to move around a lot. Cells are usually “U”
or “C” shaped, with operations in order according to the flow, so that workers can
move around freely.
Cross-training has to be applied within the cell. Workers have to be able to move
from one station to the other and work on both manual and mechanical operations.
The number of workers within the cell is determined by takt-time and the size of the
cell.
Last but not least, Autonomation, or Jidoka, should be used within the cell. These
involve modifying the machines so that they are able to perform checks by
themselves; thus workers do not have to waste time performing manual checks.
Cell time analysis
Date: Team: Code: Cell: N° of 
workers:
# Step Machine 
n°
Workers’ time Machine 
time
Movements Total 
time
Daily 
capacity
Comments for 
improvement:
1 Cutting T5 10 9 2 21 1200
2 Folding T1 10 14 10 34 741 Reduce 
movement 
time
3 Welding S3-A 10 3 2 15 1680
4 Assembly 13 8 21 1200
5 Polishing LT456 5 17 22 1145
6 Final 
check
Tr67 12 2 6 20 1260
Total cell 133
time
Note: Time is 
measured in 
seconds. 
Fig. 6.19 Cell time analysis
6.6 Cellular Manufacturing and One-Piece-Flow 103
For example, in a machine that produces at constant speed and pressure, an alarm
that signals when variations occur could be installed. To keep takt-time in a one-
piece-flow cell, an alarm could signal the end of a code cycle, automatically
unloading the product. Autonomation can also be linked to another basic principle
known as mistake proofing or poka-yoke, which can be applied to both manual and
mechanical stations. These systems check products and processes and immediately
signal defects using sirens or lights. Often these signals also cause the flow to stop.
Example of Poka-Yoke. An engineering company has to assemble covers using
six screws with critical torques. The worker has to put all six screws in place, while
the torque wrench connects to specific hardware to check whether the screws are in
the correct order. If a screw happens to be forgotten, a siren blocks the whole station
until the screws have been placed in the correct order.
Poka-yoke can also be applied in the service industry or in public administration.
“Smart” trolleys for medicines have been used for a few years now: a barcode on
the patient’s file is compared with the barcode on the medicine to avoid mistakes.
6.7 Heijunka Board
The heijunka board (or box) was developed by Toyota in the 1960s to keep
quantities and the productive mix within a cell leveled. The leveling concept may
also be applied in traditional areas, but only if set-up times have been reduced,
allowing the workers to swiftly switch from one code to another. Benefits include:
• Reduction of the amount of processed lots;
• Reduction of lead time;
• Reduction of frozen capital;
• Improved value stream organization.
This method is not used a lot in the Western world; this is because excellent
organizations teach us that it can only be applied after having redesigned the cell to
its best by introducing Kanban and quick changeover concepts. Traditionally, the
heijunka board is a program schedule that is placed near the “pacemaker” operation
of the cell. The pacemaker is a production program placed in one point of the cell
that sets the rhythm and pulls the processes upstream; it could, for example, be
placed at the final operation from which the products are then sent to the customer.
Here, every single day, the quantities and codes that need to be produced are set
according to takt-time; Kanban labels then use this information to order products
from the upstreamprocesses. The heijunka board is nothing more than a metal or
wooden box or board placed where the pacemaker is (see Fig. 6.20).
Consider the following example: from the last operation of a process, the
quantities shown in the left-hand column of Fig. 6.21 of certain codes (A, B, C, D)
are sent to upstream processes.
104 6 The Main Methods of Lean Organization
A typical month contains on average 20 working days; the daily average quantities
are thus calculated and recorded in the third column. To organize Heijunka program-
ming on a half-day (4 h) basis, the half-day could be divided into 15-min intervals. For
practical reasons however, because codes A, B, C and D need to be produced at a
frequency higher than 15 min, the half-day needs to be divided into intervals of at least
30min. Following this organization the board shown in Fig. 6.19 can be assembled. The
rows define the code; the columns represent a half-hour segment each. In each box the
Kanban labels that need to be withdrawn in that segment are placed. In the first half-
hour, one A label, two B labels, and one each of C and D are withdrawn; in the second
half-hour, however, one A label and two B labels are withdrawn. The Kanban in each
slot defines the pitch: the pitch is takt-time multiplied by customer demand. In the
example, pitch is equal to one because we assume that only one product of each code is
sent to customers each day, but obviously customers could demand different-sized lots.
Organizations that have not applied Lean and thus have not reduced set-up time or
freed the value stream of waste, typically program large amounts of one code at a time
instead of using heijunka. If Fig. 6.19 were an example of a traditional company,
the half-day sequence would probably be more along the lines of: AAAAAAA, then
BBBBBBBBBB, and so on, causing inevitableWIP throughout thewhole value stream.
Code A
Code B
Code C
Code D
Code E
Fig. 6.20 A traditional heijunka board
Part Number Monthly quantity Daily quantity Half a day quantity Ratio
A 320 16 8 (1 every 30’) A/C = 2:1
B 640 32 16 (1 every 15’) B/C = 4:1
C 160 8 4 (1 every 60’) C/C = 1:1
D 240 12 6 (1 every 40’) D /C = 3:2
Fig. 6.21 Heijunka program
6.7 Heijunka Board 105
6.8 Quick Changeover and Single Minute Exchange of Die
The Single Minute Exchange of Die (SMED) method was developed by Shigeo
Shingo from the late 1950s to the early 1960s. Shingo was a consultant for many
Japanese organizations, including Toyota, who managed to obtain excellent results
with this method on traditional car body molding presses. SMED is vital to achieve
quick changeover, which reduces WIP and improves lead time. Unfortunately,
many companies believe that SMED and quick changeover is the same thing.
SMED was developed on presses, where the classic stamp change represents
changeover to produce a different code. Lately, however, reducing changeover time
has been the object of discussion for many different types of machines and service
processes. Nowadays we even have applications that reduce changeover time in
hospitals, reducing time between one operation and another, or applications that
make it possible to host various events in the same conference room and so on. The
main concept is that of quick changeover, whereas SMED is linked more to
machine and stamp changes; in any case, from here on these two concepts will be
considered equivalent. Reducing changeover time is vital when striving to reduce
WIP. It is fairly obvious that if changeover time is high, according to the concept of
“economical lots”, large lots will need to be produced before stopping and chang-
ing. Organizations that apply SMED also list other benefits, such as:
• Improvement in safety regarding the plant;
• Improved ergonomics for the workers who perform changeover.
To apply SMED, changeover activities need to be divided into four stages.
6.8.1 The Four Stages of SMED
The organizations that apply SMED usually follow these four steps:
• Stage 1: Identification of internal and outer set-ups and preparation.
• Stage 2: Conversion of as many internal set-ups as possible into outer ones.
• Stage 3: Improvement of internal set-ups.
• Stage 4: Improvement of outer set-ups.
Internal set-ups (Internal Exchange of Die, IED) are activities that can only take
place when the machine or process has been frozen; for example physically remov-
ing the stamp or its components, or moving a patient from the operation room.
Outer set-ups (Outer Exchange of Die, OED) are activities that can take place
while the process continues to flow. For example removing the next stamp from the
warehouse and preparing it for the job, anesthetizing a patient, preparing material
for the next event. Outer set-ups can be carried out while the process works
normally, thus saving time.
106 6 The Main Methods of Lean Organization
Having completed all four stages, Kaizen teams need to repeat them at various
times so as to effectively improve changeover times. Many manufacturing
companies have seen that it is quite easy to move from changeover times lasting
a few hours to ones lasting under an hour. To achieve changeover in less than
10 min, however, SMED has to be repeated various times, over many years, maybe
even through modifications to the machinery or redesigning of the product/service.
6.8.2 Identifying Internal and Outer Set-Ups and Preparation
This stage is vital because it separates activities that can only be carried out when
the process has been frozen from those that can be carried out during flow.
The problem is that many workers do not realize that some operations can be
carried out while the machines are working, and processes are often stopped
unnecessarily. When formula one drivers stop in their paddock they have to leave
it as quick as possible; in fact everything is prepared and kept ready so that the time
the driver spends stationary is kept as short as possible.
On average, changeover can be reduced by 60% by converting internal set-up
operations to outer ones (results obviously depend on the initial situation). During
changeover preparation, some simple tasks can be carried out to save time:
• Preparation of checklists and set-up operations;
• Performance checks on equipment and tools;
• Improvements regarding transportation of various components.
The checklist lists everything needed for set-up, including:
• Tools, equipment, instructions and workers;
• The necessary working conditions (e.g. temperature, pressure, electricity, size, etc.);
• Any measures that need to be taken.
Figure 6.22 shows one such checklist; they are especially useful to avoid
mistakes or to avoid the wasting of time looking for tools, and are always specifi-
cally tailored for the machine concerned.
The checklist also mentions health and safety conditions for workers, and
environmental issues; these are very important and must never be neglected. The
list refers to kits and sets: these contain tools and equipment needed for set up that
have been prepared beforehand thanks to 5S. This means that workers do not have
to waste time searching for things they need. Checklists should be prepared
specifically for each machine because general lists only create chaos.
Checklists can also be used for activities that are not linked to manufacturing.
According to the New England Journal of Medicine, checklists not only reduced
patient changeover time by 30%, but also reduced deaths caused by operations by
40% (from 1.5% down to 0.8%). Checklists are incredibly useful when preparing
for changeover and they reduce mistakes considerably.
6.8 Quick Changeover and Single Minute Exchange of Die 107
Checklists, however, cannot really avoid the waste of timecaused by the
performance of tools. Workers may be fully prepared during set up, but if when
changeover occurs they realize that a tool has not been sharpened and the screw-
driver is not working, then all the preparation was, indeed, pointless.
Usually, after having used the tools and before placing them back where they
belong (an area designated by 5S), the tools should be accurately checked so that if
they need repairing or maintenance it can be carried out before their next use. These
checks should be standardized and included in the instructions all workers have to
follow. Last but not least, components and tools should be moved from the
warehouse to the workstation while the process is still at work, so as not to waste
time when flow is stopped. If the objects that need to be moved are heavy or bulky
Machine TH4 checklist
SMED operation
Tick off Necessary items
Competent workers (check worker ability report) 
Necessary tools
Pneumatic screwdriver
Keys n° TH
Mold components
Mold part A
Mold part B
TH screw set
TH body anchor set
Other necessary equipment
Magnetic lifter
Personal protection equipment (refer to instructions ILSS08)
CTH4 gauge
Oil collector and cleaning kits
Refer to instructions: ILQ15 “Changing press molds instructions”
ILSS08 “Protections for maintenance and set up”
ILA02 “Managing environmental impact on presses”
Fig. 6.22 Checklist (tailored according to the machine)
108 6 The Main Methods of Lean Organization
this could already save a lot of time. Figure 6.23 (an example of a SMED applica-
tion) shows such an example: it involves the mold changeover of a hot press.
Figure 6.23 shows an improvement to SMED brought by a Kaizen workshop. In
the improved situation, a second cushion made it possible to reduce total mold
transportation time. In fact, after the workshop, the crane moves the new mold from
the warehouse to cushion number 2. The machine is then switched off; the mold is
removed and placed on cushion number 1. The new mold is then installed and the
old one is moved towards the warehouse. Before the workshop, the machine had to
be switched off, the old mold was removed and moved to the warehouse; here a new
mold was picked up, transported to the machine and installed. Changeover time was
reduced by 10% by applying these small modifications. This example comes from
an excellent German organization that boasts among the best set-up times in the
world.
Before
After
6
3
4 5
1
2
4
5
3
27
8
1Press
Press
Cushion 1
Cushion 1 Cushion 2
Mold Warehouse
Mold Warehouse
Fig. 6.23 Improvement in mold change of a large press
6.8 Quick Changeover and Single Minute Exchange of Die 109
6.8.3 Converting Internal Set-Ups to Outer Ones
After the preparation stage, which involved creating checklists, applying checks
and improving transportation, the next stage involves converting internal set-ups to
outer ones. This stage allows a further decrease in times and can be divided into
three different aspects:
• Preparing working conditions;
• Standardizing operations;
• Use of jigs.
Preparation of working conditions includes following the checklists; thus not
only having components, tools and equipment at the ready but also having prepared
perfect working conditions. While the machine is still working, conditions such as
temperature, pressure, lubrication, cleaning and components can be prepared. This
includes, for example, preheating molds and lubricating them or, in a hospital,
preparing a certain surgical tool beforehand.
Standardizing operations helps reduce changeover time considerably. Videos
taken during a SMED Kaizen workshop, for example, show workers wasting time
by adjusting, measuring or fixing a machine in preparation for a new mold. Often
changeover can be speeded up by always using stamps of the same size and
thickness to avoid unnecessary adjustments. Similarly, tools that permit quick
centering can be installed on machines. Jigs can also be used to standardize mold
installation.
6.8.4 Improving Internal and Outer Set-Up Activities
To improve internal set-up operations, most companies rely on four steps:
• Carrying out operations in parallel
• Carrying out operations in parallel usually involves two workers working at the
same time to save time. The downside is obviously that manpower costs
increase, but often one single worker takes more than double the time of two
workers to carry out the same activity. When the set-up area is quite big, for
example, spaghetti-charts show that if there is only one worker, 80% of time is
wasted in movements. Two workers, by contrast, can separate and work at the
same time in different areas.
• Using clamps
Molds and tools that are attached by using screws, bolts and nuts are just a waste
of time. Screws go missing quite a lot, especially when there are a lot of them;
they get mixed up easily, and they obviously have to be screwed in, which is a
waste of time. Clamps are quicker and can be used directly on the machine.
• Eliminating adjustments
Methods that quickly fix molds and tools include:
110 6 The Main Methods of Lean Organization
– Single-movement levers;
– Magnetic systems;
– Interlocking systems;
– Making the system visible and easy to use by applying instructions to the
machines.
• Using the most efficient tools and equipment available
• When set-up has been improved following the aforementioned steps, many
organizations choose to replace tools and equipment with more efficient
versions. Photos and videos of SMED could show that a trolley would be faster
than a crane (or vice versa), or that a transpallet could improve workers’ speed in
certain situations.
6.9 TPM
TPM organizes maintenance and strives to reduce machine failure and other similar
problems that reduce efficiency of productive processes and service implementa-
tion. To do so, TPM includes every member of staff: from workers, supervisors and
maintenance staff all the way up to senior management. Due to this trait, TPM
should be considered more than a simple method; it is, in fact, a proper management
system that should be used within Deming’s classic PDCA approach. Ever since the
1950s, books that discuss Lean and TQM refer to the figurative “TPM temple”, a
temple held upright by a certain amount of columns that differ from author to
author. These columns represent TPM goals, which can be summed up as follows:
• Reduction of machine/plant/process downtime;
• Increase in workers’ awareness and responsibility regarding possible problems
with the machine;
• Constant cleaning guaranteed;
• Reduction of machine management costs;
• Improvement of general plant efficiency and effectiveness;
• Improvement of product/service quality.
To measure said results, overall equipment effectiveness (OEE), a method
explained in Chap. 7, is surely the best result indicator. OEE measures availability,
efficiency and quality; these three traits are heavily influenced by six well-known
losses:
Loss due to downtime (reduces availability)
• Sudden breakdowns;
• Stops needed for equipping, set-up, and adjustments.
Loss of speed (reduces efficiency)
• Reduction of speed;
• Minor interruptions.
6.9 TPM 111
Loss of quality
• Defects within the process;
• Waste and loss of yield during startup.
Most Western organizations have abandoned vague instructions based on Japa-
nese models, and base their TPM approach on the following steps:
• Initial plant condition assessment.
• The general performance of the plant should be analyzed before defining targets;
this can be done in terms of OEE. During this first step all data regarding
maintenance and breakdownin the past should be recorded.
• Defining targets and ensuring management commitment.
• Management defines the OEE targets that need to be reached by plants.
Supervisors can then define OEE targets for single machines and monitor
progress day by day according to the procedures discussed in Chap. 7. When
defining targets many Western organizations tend to use industry benchmark
values as a guideline for their own. Senior management then shares TPM
strategies with the whole company and defines the necessary resources.
• TPM training and awareness
• Staff members require TPM training specifically focused on their job. In partic-
ular, process supervisors require OEE accounting and management training on
their specific process, cell, assembly line, and so on. Machine operators need
awareness training regarding the maintenance they should carry out on their own
and 5S. Specialized workers can take care of defining preventive and predictive
maintenance programs.
• TPM campaign launch according to set times.
• Daily OEE data registration and continuous corrections when results are off-
target.
• Periodic check-ups by management and definition of new targets.
6.9.1 The TPM Campaign: First Step, 5S
Having completed all the necessary preparation, a company ready to launch the
TPM campaign needs to take the first step by applying 5S. At this initial stage,
many processes hide problems disguised by mess and general lack of tidiness. A 5S
Kaizen team should restore perfect order and tidiness to all machines and cells,
sorting all equipment and tools according to the aforementioned procedures. Usu-
ally 5S casts light on many problems, mostly regarding WIP but, in this case, also
regarding maintenance.
Example of 5S Applied as Part of TPM. Following a 5S Kaizen workshop that
cleaned, tidied and polished all machines to a high shine, the team was able to
identify the source of several oil leaks that had previously been a mystery.
112 6 The Main Methods of Lean Organization
6.9.2 Self-Maintenance: Maintenance Carried Out by Workers
The next step is defining daily maintenance that workers should carry out them-
selves. Workers are often only trained for production, and maintenance, be it simple
or complex, is left to be carried out by trained professionals. This happened in many
companies before TPM principles were introduced; workers were trained for
production leaving all the other aspects to specialists. Assigning maintenance to
external operators often leads to the following consequences:
• Loss of information that can only be registered by workers that use a certain
machine on a daily basis. We offer the following example: in a manufacturing
company a worker noticed strange vibrations that led, a couple of days later, to a
massive breakdown. The worker had been trained to produce as much as
possible, without wasting time with reports or warning, leaving maintenance
to other members of staff.
• Loss of awareness regarding the fact that the quality of the product also depends
on the quality of the machine.
• Increase in machine management costs.
• Reduction of machine life expectancy.
Workers require specific training if they are to simultaneously produce, check
performance and product quality, and carry out maintenance. Companies that apply
TPM recommend training based on:
• 5S;
• Basic technical knowledge of the machine;
• Basic maintenance, lubrication, cleaning, adjustments, check-ups, and so on;
• How to predict breakdowns;
• Knowledge on defining the cause of a breakdown;
• Knowledge on common causes of breakdown or decrease in quality;
• Basic process knowledge and information regarding what can cause defects in
products;
• Knowledge regarding how to interpret altered machine functioning;
• How to identify the cause of defects and how to deal with said causes;
• How to react in case of emergency;
• How to replace and repair machine components;
• Safety measures.
To help workers adjust to new procedures, checklists containing instructions on
how to carry out operations can be drawn up.
6.9.3 Preventive Maintenance
Workers who have been suitably trained can carry out daily maintenance
procedures. These procedures are thus included in daily production activities and
6.9 TPM 113
are no longer considered additional services that waste production time. By
cleaning, lubricating, adjusting, carrying out small maintenance operations and
keeping tabs on quality and performance, OEE levels dramatically increase in
short periods of time. Thus efficiency and productivity increase, and general
defectiveness decreases. The worker will, however, have limited knowledge
regarding certain functions and technical details because these are increasingly
linked to complex software and structures: complicated or specific maintenance
will have to be carried by a specialized professional.
Once daily maintenance has been ensured, the next problem is programming
maintenance that has to be carried out periodically over longer periods of time.
Maintenance that has to be carried out once a month, every 2 months or every half-
year has to be planned in advance. Preventive maintenance needs to be viewed as a
necessary measure to avoid breakdowns, machine failures or loss of quality that
could cause great damage. Often machines break down due to lack of maintenance,
causing major hold-ups in production; even small losses of speed can be avoided
through regular maintenance.
The main problem is calculating how often these maintenance operations should
be carried out to avoid problems. Specific software and files need to be kept up-to-
date with all maintenance carried out, acting as a reminder for the next
appointments. This database should initially refer to recommendations listed in
manuals; however, over longer periods of time, unexpected problems requiring
immediate attention could crop up. Workers should carry out daily maintenance
and check-ups, reporting any anomalies or problems they notice and, if necessary,
modifying the maintenance plan. Figure 6.24 shows a typical worksheet recording
maintenance carried out and any problems registered. The area is checked and
maintained according to a checklist; any problem or unexpected operation has to be
recorded. These sheets can be used, according to the type of machine, for periods of
time varying from 1 week to a month; the team will have to deal with unexpected
problems when they crop up.
These reports, recorded in the database, help workers understand whether the
frequency of certain operations needs to improve, or whether new maintenance
programs need to be introduced. The problem described on the spreadsheet regards
vibrations caused by the recirculation screws; if this problem should cause a
breakdown every 14 months, for example, a specific maintenance operation should
be carried out at least once a year. Maintenance databases use the following
indicators to analyze problems:
Mean Time Between Failures ðMTBFÞ ¼ Mean Time To Failure ðMTTFÞ
þMean Time To Repair ðMTTRÞ
MTTF is applied to systems that cannot be repaired, measuring the time leading
up to the failure of the system, which then needs to be replaced. Most screws have
several tens of thousands of hours of MTTF; they are then replaced because they
cannot be repaired. MTBF is applied to systems that can be repaired; it is the total of
MTTF (calculated regarding the component that requires reparation) and the
114 6 The Main Methods of Lean Organization
average time necessary for the repair. For example: a mold has MTTF of 260 days
and an average repair time of around 15 days, altogether 275 days.
Bibliography
Alukal, G., Manos A.: Lean Kaizen: A Simplified Approach to ProcessImprovements, p. 900.
ASQ, Milwaukee (2008)
Arai, K., Sekine, K.: TPM for the Lean Factory: Innovative Methods and Worksheets for
Equipment Management. Productivity Press, Portland (1998)
Machine maintenance sheet 
Machine: MP IT 2 Month: June Check list: WI-18
Machine problems/failures – Unexpected maintenance
# Date/time Problem Signature State
1 5/6-8:23 Vibration on 
screw (X -axis)
Paul N
2 14/6-5.00 Docking tool 
post. It doesn’t 
release it 
Paul IM –
A45
3 15/6-8:41 Vibration on 
X-axis screw (see 
note)
John R
Explanation: 
N = New. Observed for the first time 
R = Repetitive (it needs analysis)
IM = Immediate Maintenance
PM = Postponed Maintenance (Operator not able to)
Note:
3 – In my opinion you can perceive vibrations just during the first work-hour 
Fig. 6.24 Sheet recording problems and unexpected maintenance
Bibliography 115
Ballakur, A., Steudel, H.J.: A within-cell utilization based heuristic for designing cellular
manufacturing systems. Int. J. Prod. Res. 25, 639–665 (1987)
Ham, I., Hitomi, K., Yoshida, T.: Group Technology: Applications to Production Management.
Kluwer, Boston (1985)
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New York (1997)
Junewick, M.A.: Lean Speak: The Productivity Business Improvement Dictionary. Productivity
Press, New York (2002)
Khanna, V.K., Vrat, P., Shankar, R., Sahay, B.S.: Usage of quality tools in the Indian automobile
sector. J. Manage. Res. 3, 157–169 (2006)
Kusiak, A.: The generalized group technology concept. Int. J. Prod. Res. 25, 561–569 (1987)
Liker, J.K.: The Toyota Way, 14 Management Principles from the World’s Greatest Manufacturer.
McGraw-Hill, New York (2004)
Monden, Y.: Toyota Production System: An Integrated Approach to Just-in-Time. Industrial
Engineering & Management Press, Norcross (1993)
Ohno, T.: Toyota Production System Beyond Large-Scale Production. Productivity Press,
Cambridge, MA (1988)
Sekine, K.: One-Piece Flow: Cell Design for Transforming the Production Process. Productivity
Press, Cambridge, MA (1992)
Shingo, S., Dillon, A.P.: A Revolution in Manufacturing: The SMED System. Productivity Press,
Stamford (1985)
Tapping, D.: The Lean Pocket Guide: Tools for the Elimination of Waste. MCS Media Inc –
Technology & Engineering, Chelsea (2002)
Warwood, S.J., Knowles, G.: An investigation into Japanese 5-S practice in UK industry. TQM.
Mag. 16, 347–353 (2004)
116 6 The Main Methods of Lean Organization
Chapter 7
Lean Metric, Lean Accounting and Value
Stream Accounting
Everything that can be counted does not necessarily count;
everything that counts cannot necessarily be counted
A. Einstein
7.1 Introduction
Chapter 4, which mainly focused on Hoshin Kanri strategic planning, discussed the
importance of defining strategic goals that can be deployed to measurable annual
targets when striving to apply Lean. The indicators and targets of these goals
control Kaizen workshops and other improvement program results directly through
Key Performance Indicators (KPIs). Specific Lean KPIs fall into the Lean Metric
category and will be explained in further detail in the following sections. Several of
these indicators are also used by TQM systems and are known as cost of quality;
others are specific to Lean application, such as Overall Equipment Effectiveness
(OEE). Each company should carefully evaluate its strategic goals to be able to
decide which process indicators are best suited, according to the deployment
process explained in Chap, 4. Organizations of business excellence that have
already applied Lean recommend that indicators should be shared, easy to measure
and, in particular, measurable in real-time. One of the main principles that Lean is
based on is, in fact:
Solve problems when they occur without postponing them.
To be able to resolve problems when they occur means having access to key
indicators every single day, without having to wait for monthly reports. Many
authors and companies that have successfully applied Lean claim that Lean
means speed; thus it is vitally important to have day-by-day or, even better,
day-by-the-hour process data updates. Many organizations make use of expensive
ERPs or similar management systems that produce interesting and detailed monthly
reports. However, for many types of analysis one month is nothing short of forever
and customers do not like having to wait that amount of time. If the process or cell
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_7,# Springer-Verlag Italia 2013
117
does not abide to takt-time or if it produces defects, then changes have to be made as
soon as possible. If no automatic monitoring systems are available, then flipcharts
and whiteboards can provide good solutions: in this case the amount of products,
defects and problems occurred should be recorded every hour or at the end of each
shift. Analyzing these results can lead to discussions regarding the efficiency of
traditional analytic accounting systems.
The system should in any case highlight, even approximately, the economic
benefits obtained. Problems linked to correctly charging overhead costs and
calculations based on the hours of manual labor can lead to aberrations and
distortions.
7.2 Defining Lean KPIs: Lean Metric
When specific Lean indicators are introduced, the benefits include not only better
control over results obtained and process improvement, but also a shift towards a
new working philosophy and new work organization. From the many benefits
introduced by Lean Metric, the following few are among the most important:
• Increase in awareness of Lean, in particular regarding goals such as reducing
lots, lead time, waste, and so on;
• Introduction of visual control management;
• Simplification of data collection;
• Improvement in data reading and analysis skills among workers;
• Increased awareness regarding the importance of continuous improvement
throughout all levels of all processes.
When classifying Lean indicators, it can prove useful to divide them based on
their purpose. By using this system, indicators useful to all levels, from operators to
senior management, can be classified (see Fig. 7.1).
Figure 7.1 presents the indicators that are most used by Lean organizations. The
indicators listed in the last column are certainly not comprehensive of all indicators
used by Lean organizations; Lean Office, for example, often leads to definitions of
new indicators specific to processes within marketing, accounting, and so on.
The following chapters contain a more accurate analysis of how to calculate and
manage the main indicators mentioned above, starting off with those used to
improve cell/process performance because they supply the quickest results in
terms of waste reduction.
118 7 Lean Metric, Lean Accounting and Value Stream Accounting
Purpose Recipient Examples of indicators
Measuring strategic goals Senior manager, Hoshin team - Turnover
- EBIT – EBITDA
- On-time delivery
- Customer satisfaction
- Warehouse rotation 
- Cost of poor quality/Turnover
- And so on
Improving processes and the 
product/service Value Stream 
Value Stream manager, process
supervisor
- Lead time/WIP
- Process cycle efficiency
- On-time delivery
- Dock-to-dock time
- First time through
- OEE
- Cost of warranty work
- Waste ppm
- Supplier cost of poor 
 quality/Supplier turnover
- On-time delivery supply code
- Reprocessing hours/Processing
 hours
- Average cost per unit
- And so on
Cell/process performance Value Stream manager, process
supervisor, operators- Day-by-the hour production
- Waste ppm
- WIP to SWIP
- First time through
- OEE
- And so on
Fig. 7.1 The most used Lean KPIs, their purpose and recipient
7.2 Defining Lean KPIs: Lean Metric 119
7.3 Measuring Cell/Process Performance Bottom-Up
The main cell and process performance indicators are linked to initial takt-time
calculation. The term takt-time comes from the German Taktzeit, meaning rhythm
or time marked by a metronome. Takt-time sets the sales rhythm, and proves to be
the best tool to achieve “tight/tense” flow from customer demand to delivery. To
reduce waste and WIP, cells and processes need to “pulse” at this frequency.
Obviously, to do so, cells must be redesigned, balanced and improved where
inefficient, according to the methods discussed in Chap. 6. Calculating takt-time
is very simple and can be done using the following formula:
Takt-time ¼ time available daily=daily product demand
Example of Takt-Time Calculation. A customer requires 950 products of a
certain code every day. The company only has one shift, thus takt-time should be
calculated as follows:
Takt-time ¼ 8 hours=950 products ¼ 0:00842 hours
In this case takt-time should be converted into seconds:
Takt-time ¼ 0:00842� 3600 ¼ 30:3 seconds
Thus the final cell, the one in direct contact with delivery, cannot have takt-time
less than 30.3 s, or rather, the process has to supply an output of one code of that
certain product every 30.3 s. The final cell receives the products from another
upstream cell, which produces two components assembled in the final cell; the takt-
time for each of these components is around 15.15 s.
This concept can also be applied to services; for example, a laboratory can set
the takt-time for withdrawals. Similarly, the front office of a public authority can set
takt-time in terms of customers/citizens attended to per procedure.
Once organization has been improved and waste has been removed during a
Kaizen workshop, takt-time can be set and workers need to receive training to raise
awareness regarding its importance. Management, too, has to change outlook,
moving from a vague monthly image towards a detailed hourly focus on all
processes.
Product/process flow should be like a raging river that flows towards the sea (i.e.
the customer) without encountering any type of obstacle. If any obstacles turn up
unexpectedly, they need to be removed immediately before they cause a flood (and
a lot of damage).
Nowadays there are many relatively cheap solutions to automatically monitor
takt-time and signal any variations.
Many companies use the famous Andon lights and sirens in the traffic-light
version, which immediately signal if takt-time is not being kept. In the past few
120 7 Lean Metric, Lean Accounting and Value Stream Accounting
years many companies have adopted displays, which are connected to specific
software and display continuously updated vital cell information. Figure 7.2 is a
photo of a 46-inch display placed in a central position within the production line of
a worldwide car manufacturer.
The display is connected to a computer that communicates with the plant ERP
database. The picture in Fig. 7.2 was taken at the end of a shift and shows a positive
daily result.
The monitor also shows an important indicator for both health and safety
management and staff motivation:
Number of days without injuries.
If many operations are carried out automatically, members of staff do not need to
waste time by recording data; it also permits all data to be saved for future
reference. The main benefit remains, however, the speed of data analysis that allows
quick action when problems crop up. If computers, software or similar tools are not
available, however, it is always best to fall back on good common sense and
traditional methods.
A one-piece-flow Kaizen workshop team managed to completely transform a
cell by calculating takt-time, and by training all workers to strive to achieve targets
and immediately react when defects occur that could shift the process away from
the target. The team, however, did not have a computer with a large monitor and
thus preferred to use the board shown in Fig. 7.3 as a temporary solution.
Every day a staff member appointed as the “Heijunka planner” sets a takt-time
target for each hour (PROG. column) based on production scheduling and Heijunka
leveling; in the photo the takt-time target for the whole day is 35. The third column
contains the amount of acceptable products produced; if any products are deemed
unacceptable, then the amount needs to be recorded in the sixth column together
with a description of the problem.
Fig. 7.2 “Andon” automatic daily cell performance control display
7.3 Measuring Cell/Process Performance Bottom-Up 121
This method could probably be improved as time passes, however workers
consider it to be the most simple and intuitive system to control takt-time and
defects, and indicators show great improvement in performance. Because the
system works quite well, the team should carefully evaluate whether buying a
new monitor, computer and so on is really necessary. The most important aspect
that needs to be considered is whether a monitor will provide easier access for
workers. The Heijunka planner (who has the same function as the milkman, see
Chap. 6) requires 5 min each morning to prepare the board and 5 min at the end of
the day to record the new data: a small investment that definitely pays off.
Other important indicators are also used within the cell, and they too require
prompt collection and analysis. First Time Through (FTT) or First Time Yield (FTY)
is another important indicator used by Lean organizations. The indicators can be
used to measure product quality and efficiency.
FTT or FTY ¼ ðTotal units processed�defectsÞ=Total units processed
FTY measures the percentage of products processed that do not need to be
reprocessed, fixed, and so on. If a cell produces, for example, 100 products in an
hour, and out of these 100 products two are defects, then FTY is 98%. FTY can be
calculated for single activities, cells or machines within a process; if a cell has
multiple stations, FTT or FTY of the whole cell is equal to the product of the single
values.
FTT cell ¼ FTT1� FTT2� FTT3� FTT4 ¼ 0:80� 0:98� 0:99� 1
¼ 0:78 ð78%Þ
Fig. 7.3 Heijunka board
122 7 Lean Metric, Lean Accounting and Value Stream Accounting
Obviously FTT does not need to be calculated for every small process; it should
only be calculated for the main processes involved. An accurate analysis of the
Value Stream Map can help identify where this indicator should be applied.
The data collected through these indicators can be recorded on data sheets hour-
per-hour or day-by-day. The boards that record the progress of process performance
should also contain graphs to help workers understand FTT progress and the
importance of process quality.
Many Lean organizations also use the Morning Market method to quickly solve
problems linked to defects. The Morning Market was introduced by the Japanese
consultant Masaaki Imai in the book Gemba Kaizen. The concept involves solving
problems in the morning before commencing production, when problems are still
“fresh” like the fish caught the day before. The Japanese refer to the Morning
Market as Asaichi, Japanese for the early morning fish market.
The Morning Market basically consists of a table placed conveniently within the
cell, where the following data is recorded every morning:
• Date of when the defect was detected;
• Process involved and process supervisor;
• Product/service number/code;
• Brief description of the problem;
• Containment action;
• Defect type, for example a ¼ known cause, b ¼unknown cause or repetitive
defect;
• Any action taken;
• Root cause, if known;
• Closure date.
The following Table 7.1 is an example of a Morning Market or Asaichi board.
The table should be dynamic, where defects can be left open for up to several
days.
The table is filled in every morning and allows the Asaichi team (3–4 process
members) to:
• Quickly detect defects;
• Connect to other processes thanks to the actions listed in column number 7;
• Keep causes in mind and test the efficiency of solutions;
• Save time in data registration, avoiding cumbersome paperwork like ISO 9001.
Table 7.1 Example of Asaichi board content
Detection
date
Process/
supervisor
Part
number
Defect
description
Containment
action Type
Action
taken
Root
cause
Closure
date
13/10 Lapping P456A Unacceptable 100 %
control
B Problem
solving
with UT
7.3 Measuring Cell/Process Performance Bottom-Up 123
OEE is another indicator used by many Lean organizations of excellence. OEE
measures the overall performance of machines by combining three types of
measurements:
OEE ¼ Availability� Efficiency� Quality where
Availability ¼ ðTotal time available�downtimeÞ=Total time available
¼ Actual working time=total time available
Downtime can be caused by many different problems, including breakdowns, set
up, repairing, and adjustments. These causes are among the famous six big equip-
ment losses that will be discussed in the following section.
If, for example, the total time available is 8 h (480 min) and total downtime
builds up to 80 min, then availability will be calculated as follows: 400/
480 ¼ 83.33 %.
Efficiency (often referred to as speed) is the production rate of a machine, and
every machine is designed to have an ideal production rate. If a machine has, for
example, an ideal production rate of 100 products per day but only produces 90,
efficiency is 90 %.
Efficiency ¼ actual production rate=ideal production rate
To avoid overproducing and creating WIP, the ideal production rate cannot be
equal to the maximum production rate the plant can reach. Target production should
respect takt-time, and if target production is equal to maximum plant production it
will only be of advantage for plant schedule.
Quality calculation is the same as the FTT or FTY calculation that has already
been discussed.
Quality ¼ FTY ¼ Total acceptable units processed=total quantity processed
The indicator measures the percentage of components without defects produced.
OEE is certainly one of the most important indicators for Lean organizations, as
many companies that have applied Lean can confirm. Both workers and managers
need to be familiar with OEE so that they can then apply corrections and preventive
action to keep respecting takt-time and avoid creating waste. OEE is especially
important because not only does it give a general indication of plant progress but it
also provides information regarding the availability, efficiency and quality of
elements. We recommend analyzing these three elements separately, rather than
as a whole, for the reasons that will now be explained.
The following Table 7.2 is an example of data collected for two different product
codes that are produced within the same cell.
Code 2 has a higher OEE and excellent machine availability; it has, however,
poor performance in terms of defects.
124 7 Lean Metric, Lean Accounting and Value Stream Accounting
OEE is often linked to TPM and maintenance that can be carried out by workers
(see Chap. 6) and can, in this case, be used to measure the benefits obtained thanks
to TPM. In addition to the traditional use in TPM, OEE can also be used to respect
takt-time. Takt-time for a cell has, for example, been set at 200 s and the cell
contains several assembly points and one single plant with a 100-second cycle time.
The plant, however, only has 90 %OEE, and thus slows production frequency down
to 90 s (100 s cycle time � 90 % OEE). Ideally machines should have an OEE of
100 % but in reality low OEE can cause slower cycle times.
7.4 OEE and the Six Big Equipment Losses
Availability is linked to six big equipment losses in plants caused by the reasons
listed below; these reasons can be classified according to which element of OEE
they affect the most.
Losses due to stops (affect availability):
• Unexpected stops such as failures;
• Stops due to maintenance, set up, adjustments.
Loss of speed (affects availability):
• Loss of speed;
• Minor interruptions.
Loss of quality (affects quality):
• Defects within the process;
• Products that need to be rejected or reprocessed.
Losses due to stops are often caused by unexpected breakdowns that are often
due to inadequate preventive maintenance. These problems increase with the level
of complexity of the machine and can be measured using the following indicators:
Mean Time between Failures ðMTBFÞ ¼ Mean Time to Failure
ðMTTFÞ þMean Time to Repair ðMTTRÞ
MTTF is applied to systems that cannot be repaired and it measures the time
leading up to the failure of the system, which then needs to be replaced. A hard disk
Table 7.2 Example of OEE
calculation
Code 1 (%) Code 2 (%)
Availability 90.00 98.00
Efficiency 90.00 90.00
Quality 95.00 92.00
OEE 76.95 81.14
7.4 OEE and the Six Big Equipment Losses 125
has, for example, several tens of thousands of hours of MTTF; it has to be replaced
as soon as it breaks down. MTBF, by contrast, is applied to components that can be
repaired; it is equal to the sum of MTTF and the amount of time that is required
to repair the components. If a press mold has 260 days of MTTF and takes 15 days
to repair, then MTBF is equal to 275 days.
Availability can also be affected by interruptions needed to adjust or equip the
machine. The SMED method (see Chap. 6) is the main method that can help reduce
set-up or equipment time.
Loss of speed can be caused by either a general decrease in production speed or
minor interruptions. Speed loss is often due to the fact that machines produces at a
much slower speed than the speed they were designed to reach. Regular mainte-
nance can help limit or solve this problem.
Minor interruptions consist in interruptions that do not cause a complete
machine breakdown; a minor interruption could be, for example, a jammed tool
or sensor.
Loss of quality also causes a waste of time because certain products need to be
discarded or reprocessed. Another loss of quality is the time it takes to reduce a
machine’s production condition to an ideal production condition; in fact, the
products processed in the meantime often have to be discarded.
7.5 Other Cell/Process Key Indicators
Productivity is another important key indicator used in many processes.
Productivity ¼ standard amount of hours=timesheet hours ¼ ðunits
processed� standard unit processing timeÞ=Timesheet hours
If, for example, four workers produce 130 products at the standard production
time of 12 min each, then cell productivity would be equal to (transforming hours
into minutes):
Productivity ¼ 130� 12=8� 4� 60 ¼ 0:81 ð81%Þ
WIP-TO-Standard Work in Process (SWIP) orWIP-TO-Target Work in Progress
(TWIP) is another important cell indicator. SWIP or TWIP can either be equal to the
amount of products or components in the supermarket, or to the amount of Kanbans
between cells. The amount of Kanbans between cells is obviously designed to
respect takt-time and/or one-piece-flow. WIP-TO-TWIP (WTT) can be calculated
as follows:
WTT ¼ Total stock within the cell=target cell stock
126 7 Lean Metric, Lean Accounting and Value Stream Accounting
Ideal WTT is equal to 1: if WTT is higher than 1 WIP is too high and takt-time is
at risk.WTT can be calculated every day and should be visible to all members of
staff. If target stock is equal to, for example, two boxes of a certain product, then
any extra boxes on the floor or on the shelves make it easy to see whether target
stock is being complied with. Target stock can be indicated by placing it within an
area designated to WIP that has been marked out with red tape; this can be of great
use for Visual Management.
7.6 Strategic and Lean Organization Value Stream Indicators
Lean organizations also use indicators that work on a strategic level, Value Stream
or process level. This does not mean that these indicators can be used only by
supervisors or senior management, but they are of more use to higher ranks because
they require deployment logic and the possibility of taking action. Before Lean, Six
Sigma or TQM were introduced, many companies were already making use of
strategic economic indicators. Lean, Six Sigma and TQM all strive to reduce waste,
thus the perfect indicator to measure results is Earnings before Interests, Taxes,
Depreciation and Amortization (EBIT or EBITDA).
EBIT or EBITDA is strongly linked to cost structure and waste reduction.
Reducing waste leads to a tight Value Stream, in which orders are “pulled” by
the customers, without any extra stock, obstacles, unnecessary movements by
workers or materials. The indicator that measures the results obtained is without
doubt lead time: Lean organization could probably strategically monitor perfor-
mance by using this indicator together with continuous waste reduction.
Sales per Person is a traditional strategic indicator that indicates whether the
workforce is being employed well.
Sales per person¼ðtotal or for a single Value StreamÞ turnover=members of staff
The indicator can be applied using either the total turnover of product/service
sales, or the single turnover for product/service sales.
Stock rotation is another useful concept:
Stock rotation ¼ cost of goods sold in one financial year=total inventory
Stock rotation, like Sales per person, can be calculated for different periods of
time (for example on a weekly, monthly or yearly basis).
WIP is a frequently used concept that can be applied to measure stock.Measuring
WIP is relatively simple and can be done visually thanks to signs and notes on
shelves or by counting the amount onKanban labels (VisualManagement); this way,
every worker can evaluate the situation and whether the target is being kept. WIP is
linked to lead time according to Little’s law.
7.6 Strategic and Lean Organization Value Stream Indicators 127
Lead time ¼ total WIP=average completion rate
Lead time is a fairly simple concept, which can be explained by everyday
situations. If a customer is waiting in a checkout queue behind 100 other customers,
and the cashier has an average completion rate of 25 s, then total lead time (time it
takes for our customer to reach the cashier) will be equal to:
100� 25 ¼ 2500 seconds ¼ 41:67 minutes:
This example can be applied to all types of queues, procedures that need to be
dealt with, customer service requests, quote emissions and so on.
The most important thing to remember is that any WIP in processes slows down
lead time.
WIP can be calculated by introducing equivalent units, which indicate the
completion percentage of resources used (labor, raw and unfinished material,
indirect costs, etc.) in proportion to the total amount of resources necessary to
produce a finished product. Basically the calculation indicates how much cost the
unfinished product (WIP) has absorbed.
The total lead time indicates the amount of time that a component requires to
cross the Value Stream, from the minute the order was received to delivery and
process closure; total lead time is often cited as dock-to-dock time. This concept can
also be applied to those processes where dock-to-dock time is measured by tracing
the first document/information/data that enters the process until the activity is
completed and the process closed. In customer care, for example, dock-to-dock
time is measured from the moment the request for assistance is registered by a
customer until the problem has been solved.
Although times within the Value Stream always have to be kept under control,
other external aspects, such as on-time delivery (OTD) should not be forgotten.
OTD measures the percentage of orders delivered to the customer on time. A high
OTD often indicates excellent external logistics and good control over the Value
Stream. Experience has shown that increased emergency stock not only represents
waste, but also leads to problems in production programming and control over lead
time; this is because emergency stock represents a safety anchor. To measure OTD,
the amount of products delivered on-time needs to be compared to the total amount
of orders received.
There are many other indicators less specific to Lean that have been inherited
from TQM; most of these provide results regarding quality. Defects (see Chap. 2)
are one of the seven wastes, and can greatly decrease results in terms of effective-
ness and customer satisfaction. Senior and middle management often use indicators
that measure costs of poor quality like the following:
• Total cost of poor quality/turnover ¼ (cost of internal and external defects)/
turnover;
• Cost of reprocessing/turnover;
• Cost of rejections/turnover;
128 7 Lean Metric, Lean Accounting and Value Stream Accounting
• Cost of reprocessing/cost of hours of labor;
• Number of manufacturing hours/total hours of direct manufacturing;
• Cost of supplier poor quality/purchase turnover;
• And so on.
The main difference between defects has already been discussed in Chap. 2 and
it consists of the difference between internal and external defects. Internal defects
are caused by defects, rejects, reprocessing and products processed within the
process before reaching the customer. External defects are worse because they
are complaints and returns, and because the defect has reached the customer there is
a loss of image and customers.
Another important indicator linked to quality is:
Dock to stock material ¼ ðproducts received in free�passÞ=total
amount of products received:
This indicator measures the level of reliability and partnership that has grown
between a company and its suppliers. Obviously supplier free-pass can only be
granted after a middle to long period of time of defect-free deliveries.
When analyzing a Value Stream Map (see Chap. 3), the Value Stream manager
or Kaizen team can also measure the:
Percentage of value-added activities within the Value Stream.
In Chap. 2 we explained that waste is every activity that adds cost but not value
to the customer. To highlight which activities are value-added, the point of view of
the customer needs to be examined to understand which activities the customer
would be willing to pay for. A similar line of argument can also be used in industrial
accounting; this will be discussed in the following section. It is pointless to analyze
activities within the process that the customer does not wish to pay for; rather, focus
should be on removing all forms of waste.
VSM or process efficiency is another indicator that can be measured by analyzing
VSM in detail.
ðVSM or processÞ efficiency ¼ ðamount of value�added activities=
total amount of activitiesÞ � 100
The same indicator can also be measured on a time basis:
Process cycle efficiency ¼ ðtime taken up by value� added activities=
total lead timeÞ � 100
The aforementioned indicators are the basic principles that lead to the introduc-
tion of Value Stream Accounting.
7.6 Strategic and Lean Organization Value Stream Indicators 129
7.7 Activity Based Costingversus Traditional Accounting
The increase in efficiency caused by the application of Kaizen workshops or similar
TQM and Six Sigma improvement projects obviously needs to be measured in
economic terms. Reducing waste leads to an increase in savings that add up as
months go by, leading to an improved efficiency percentage that can be compared
to turnover. These savings are easy to spot at the end of the fiscal year, when general
accounting reports the EBIT-EBITDA improvement; savings are, however, quite
difficult to spot on a day-to-day basis. This can be quite a problem linked to
improvement projects in general; TQM and Six Sigma, in fact, use traditional
accounting methods, which are based on the division of costs into direct and
indirect costs and the use of cost centers.
Traditional accounting was used a lot during the years of mass production; it is
based on the concept of an ever bigger production lot, a concept justified by the
markets’ demand in those years. When producing in large lots direct costs, such as
labor, are much greater than indirect costs, which can thus be calculated at an
approximate level. During the mass production market the code demand was low
and the amounts very high; set-ups were few, design, research and development
were limited and WIP and finished products took up less capital. In fact, during the
years of runaway inflation, having extra stock was not such a bad thing because
everything would be sold eventually. Unfortunately in the Western economy these
concepts still exist and traditional accounting is still alive and well.
Traditional accounting identifies cost centers based on departments, processes,
cells, plants, and so on, to which direct labor, plant amortization, raw materials and
unfinished products of that center are assigned. In the 1970s and 1980s this method
was used to assign the main chunk of costs; what was left was known as overhead
costs, indirect and generally low costs. However, nowadays these indirect costs,
such as marketing, design, development, maintenance, transport, quality, supplier
management, and so on are continuously increasing; in traditional accounting they
tip over on cost centers (i.e. indirect cost are distributed on the cost centers),
according to formulas like the following:
ðTotal overhead costs of the period� direct center hoursÞ=
direct labor hours within the period:
The more hours of labor the center absorbs, the higher overhead costs will be:
this is the indisputable postulate of traditional accounting.
Dividing the hours of labor by the number of products of the cost center period
output, the average cost per lot or product can be obtained; this is vital information
because it helps decide on tag price, Make or Buy budget, and so on. However, this
type of accounting can lead to major errors. The following example, based on a real
story, will remove any doubts regarding the mistakes of traditional accounting. Two
different processing lines (A and B) working on different product families were
130 7 Lean Metric, Lean Accounting and Value Stream Accounting
defined cost centers. The cost of one lot of A and B products, of similar quantities,
was calculated using the Table 7.3:
Apparently a lot of A products is more expensive a lot of B products because it
requires more direct labor and thus more indirect costs. The company manager also
underlined the fact that product families A and B had been designed over 10 years
ago to have similar design costs, marketing would not need to make a particular
commercial effort for either product and performance in terms of rejects and
reprocessing of both products is very similar. Thus one could confirm that the
results presented in the Table 7.3 are correct. However, a Kaizen workshop
uncovered information that was unknown to management: handling that brought
products to and from processing lines (overhead costs) only took up 10 % of time
for products from processing line A, whereas a staggering 90 % of time was taken
up by products from processing line B (see Fig. 7.4).
In the end, 10 € of handling were spent for products from line A and 90 € were
spent for products from line B. The calculations from the Table 7.3 were inaccurate.
The controller decided to improve this situation by making handling costs direct.
Activity-Based Costing (ABC) will be explained toward the end of this section; this
method takes all direct costs into account, and would have immediately flagged
such a situation.
The following example can better illustrate how traditional accounting leads to
distortions when calculating improvement program results. Starting off from the
situation shown in Fig. 7.5, a Kaizen workshop brought results that led to the new
situation shown in Fig. 7.6. Figure 7.7 shows the improvements obtained in said
workshop; U-cells were introduced and SMED was applied to the press. Several
non-value-added activities (those highlighted in gray) were removed, press set-up
time was drastically reduced from 330 to 26 min but, unfortunately, lot preparation
Table 7.3 Cost of a lot using traditional accounting
Cost center A lot Cost center B lot
Unfinished products and raw material
costs ¼ 30 €
Unfinished products and raw material
costs ¼ 28 €
Direct period labor costs ¼ 160 € Direct period labor costs ¼ 120 €
Plant amortization ¼ 10 € Plant amortization ¼ 12 €
Indirect costs quote ¼ (total indirect period
costs � direct center labor time)/direct labor
(time) ¼ (560 � 16 h)/28 h ¼ 320 €
Indirect costs quote ¼ (total indirect period
costs � direct center labor time)/direct labor
(time) ¼ (560 � 12 h)/28 h ¼ 240 €
Total lot A cost ¼ 520 € Total lot B cost ¼ 400 €
Cost center B
Cost center A
Ware
house
Fig. 7.4 Handling toward the
centers
7.7 Activity Based Costing versus Traditional Accounting 131
time increased by 1 min per product (from 2 to 3 min). The controller, having
analyzed the situation together with the Kaizen team, filled in a “Finance” ERP
form, based on traditional accounting, and printed the report that can be seen in
Fig. 7.8. The report shows that after over a week of Kaizen workshop carried out by
six members of staff, the cost of the product had increased: a complete failure. It is
true that the sum of all cycle times had increased by 1 min and thus the cost of direct
labor had increased from 3.80 € to 4.00 €; but what about set-up time reduction,
WIP reduction and the increase in space? Set-up was carried out by members of
staff who were not considered direct, in other words not directly linked to cycle
Visual Inspection
250
FIFO
Welding Press
Dimensional 
Inspection
FI
FO
Lot preparation
C/T = 2' per product, 
500' per lot
C/T = 4.5' per 
product 
C/T = 4.5' per 
product 
C/T = 1.5'
C/O= 330'
C/T = 6.5' per 
product 
SMED
U Cell
Fig. 7.5 As is process VSM
Visual Inspection Welding Press
Dimensional 
Inspection
FI
FO
Lot preparation
C/T = 3' per product, 
75' per lot
C/T = 4.5' per 
product 
C/T = 4.5' per 
product
C/T = 1.5'
C/O= 26'
C/ T = 6.5' per 
product
Fig. 7.6 Future state process VSM
132 7 Lean Metric, Lean Accounting and Value Stream Accounting
time. The wages of these workers, even after the workshop, stayed among indirect
costs, and nowhere, except maybe in the long term, can we see the benefits of
having reduced set-up time by 304 min.
During mass production when codes were limited, the demand was stable and
lots were big, the analysis by the controller probably would have made sense.
Big lots are usually used when striving to achieve the following goals:
• Customer service based on a large amount of stock;
• Operative margins created by using plants and machines to a maximum;
• Detailedproduct cost calculation through cost centers;
• Indirect costs calculated in proportion to direct labor.
Fig. 7.7 Activity analysis worksheet
7.7 Activity Based Costing versus Traditional Accounting 133
The renowned ABC accounting system started to challenge the traditional
accounting system back in the 1990s. The new system is based on the simple, yet
effective, principle that there are no indirect costs: all costs are direct regarding the
process. To calculate product cost, all costs within the process are added up.
Marketing, design and development, purchases, logistics, maintenance, quality,
and so on, all create direct costs, as does cell/process production. Basically, the
whole process from start to finish becomes the cost center, and all costs are
considered direct. This concept is fairly simple in theory; however putting it into
practice can prove to be more complicated. This is because it means that, for
example, a designer has to record on a daily basis how many hours were spent on
a particular product and howmany on another, or that a forklift driver has to register
how many products of which code he or she handled altogether. The costs can be
considered direct thanks to the cost driver. The example of the forklift driver can
better illustrate the cost driver concept. For example, one production line produces
three products, A, B and C; management needs to analyze the cost of the forklift
driver (a classic overhead cost) and how much this cost influences the total cost
of all three products. The following Table 7.4 shows how this can be calculated
with ABC.
Before Kaizen Workshop After Kaizen Workshop
Unit cost of the semi-finished 
product: 35
Unit cost of the semi-finished 
product: 35
Cost of direct workforce
(minutes of working*cost of the 
workforce):
19’*0.2=3.8
Cost of direct workforce
(minutes of working*cost of the 
workforce):
20’*0.2=4
Overhead share
(Amount of indirect costs of the 
period*Direct workforce time in the 
centre)/Total amount of direct 
workforce:
Overhead share
(Amount of indirect costs of the 
period*Direct workforce time in the
centre)/Total amount of direct 
workforce:
18.02 18.03
Plants amortisation share: 2.07 Plants amortisation share: 2.07
Total cost of the product: 57.94 Total cost of the product: 58.01
Fig. 7.8 Table showing product cost according to traditional accounting before and after the
Kaizen workshop
134 7 Lean Metric, Lean Accounting and Value Stream Accounting
Every product handled by the cost driver costs 0.05 €; when analyzing the cost
of one lot, or of the products handled in a certain period of time, for example 1 day,
the amount of products is multiplied by the cost per unit. The controller can
calculate the whole cost of the product by adding up the costs of all the activities
within the process. For example, the hours spent using CAD or the amount of
drawings completed could represent the cost driver for a designer. ABC accounting
remains however quite complicated due to the following reasons:
• To apply ABC, an accurate map needs to be drawn to identify the driver of each
activity (e.g. the amount of products handled for handling); in certain processes a
product can pass through hundreds of different activities.
• Having identified the driver, the unit cost needs to be calculated.
• The amount of drivers needs to be recorded either on paper or on software; for
example, the designer needs to record how many hours were spent on product A,
how many on B and so on.
In the 1990s and the first years of the new millennium, ABC was considered
handy thanks to the circulation of PCs, tablets barcode readers, Wi-Fi and so on.
Thanks to these systems many calculations can, in fact, become automatic. If the
forklift driver uses a barcode system, for example, calculating how many products
of which code were handled is quite easy; other activities, however, still need to be
analyzed manually. ABC is an interesting concept but application is complex and
difficult. In addition, many managers and software developers are hostile towards
ABC.
A company had moved from a traditional AS 400 accounting system to an ERP
based on a form similar to ABC accounting; a detailed process cost analysis would
have made it possible to calculate the cost drivers, cost per unit and the different
activities.
The analysis would have required 100 working days; the project was rejected
and the old accounting system, based on cost centers and indirect costs, was applied
to the new ERP form. The same company has applied Lean Six Sigma and speaks
very highly of it; industrial accounting is however still carried out the same way it
was carried out in times of mass production.
The theoretical potential of ABC can be seen in Fig. 7.9, which shows the cost
benefit obtained by the previous workshop. One slightly more enlightened controller
repeated calculations using a simple Excel spreadsheet and ABC logistics; the
results are visibly different, and the product cost per unit drops by 10 cents after
the workshop. Every process was divided into the activities that involve the product,
Table 7.4 Example of ABC calculation
Activity Cost driver
Cost driver
per unit
Daily product cost ¼ number of products handled
per day � cost driver per unit
Forklift
handles
lots
Number of
products
handled
0.05 € A ¼ 100 � 0.05 ¼ 5
B ¼ 60 � 0.05 ¼ 3
C ¼ 20 � 0.05 ¼ 1
7.7 Activity Based Costing versus Traditional Accounting 135
and for each activity the driver and cost were identified (except for the cost of
unfinished products, which consists of a simple invoice from the supplier). By
analyzing the gray row, “cell cost”, benefits that caused a decrease of 10 cents can
be analyzed.
Figure 7.10 highlights the improvements introduced by the workshop in terms of
removing activities that are not value-added. The rows that have been highlighted in
gray show the activities removed after the workshop, which is why they have a 0 in
the last column. The third column lists the costs linked to the activity. For example
in the second row (“lot preparation”), the driver is the minutes of labor, thus, in the
third column the cost is calculated by multiplying the cost of 1 min of labor (0.25 €)
by the minutes required to prepare one lot, which are 500 (see Fig. 7.5). Because the
activities within the cell were carried out in lots, the controller had to calculate the
costs per lot; in the final cell, product unit cost, the cost is divided by the amount of
products per lot: 250 before, 25 after the workshop. ABC makes it easy to analyze
the benefits obtained by both reducing press set-up time and by removing non-
value-added activities.
Id Before Workshop After Workshop
1 Unit cost of the semi-finished 
products (invoice): 35
Unit cost of the semi-finished 
products (invoice): 35
2 Cost of marketing process: 
0.20
Cost of marketing process: 0.20
3 Cost of design and 
development process: 2.10
Cost of design and development 
process: 2.10
4 Cost of accounting and IT 
process: 2.62
Cost of accounting and IT 
process: 2.62
5 Cost of supply chain 
management: 3.65
Cost of supply chain 
management: 3.65
6 Cost of quality management: 
0.10
Cost of quality management: 
0.10
7 Cost of shipping and 
warehouse management: 0.90
Cost of shipping and warehouse 
management: 0.90
8 Cost of service and post-sales 
process: 5.10
Cost of service and post-sales 
process: 5.10
9 Cost of the cell: 3.67 Cost of the cell: 3.57
10 Plant amortisation share: 2.07 Plant amortisation share: 2.07
Total cost of the product: 55.41 Total cost of the product: 55.31
Fig. 7.9 Product cost table according to ABC before and after the workshop136 7 Lean Metric, Lean Accounting and Value Stream Accounting
7.8 Lean Accounting and Value Stream Accounting
The market has caused a complete reversal of productive paradigms. In the first
chapter we discussed the current era, where products and services are heavily
personalized, projects and research ever more dynamic, raw materials increasingly
expensive and customers who have the final say on the price. The car component
industry surely represents one of the most striking examples of the current market
situation. The following Table 7.5 sums up the main changes in productive
paradigms from mass production to Lean organization.
Lean Accounting is the evolution of the ABC/ABM (Activity-Based Manage-
ment) accounting concepts developed in the 1990s. In Lean Accounting overhead
costs do not exist because all costs within the Value Stream are considered direct.
Maximum marginality in product/service sales can be obtained by continuously
reducing lead time and accelerating order-to-cash; in this line of thought indirect
Value Stream 
Activities
(Highlighted in
grey the eliminated 
activities)
Cost Driver Cost of the lot 
(before) 
Cost of the lot 
(after)
Movement towards 
preparation
N° of handled
lots
0.25 (x1) = 0.25 0.25 (x1) = 0.25
Lot preparation N° of prepared 
products 
0.25 (x500) = 125 0.25 (x75) = 18.75
Visual Inspection N° of 
inspected 
products
0.6 (x250) = 150 0.6 (x25) = 15
Movement towards 
buffer 
0.1 (x250) = 25 0
Movement from 
buffer to welding
N° of manual
movements
0.2 (x250) = 50 0
Welding N° of welded 
products
0.6 (x250) = 150 0.6 (x25) = 15
Movement towards 
press
N° of handled 
lots
0.30 (x1) = 0.30 0
Press Set-up Workforce 
minutes
0.2 (x330) = 66 0.2 (x26) = 5,2
Press N° of pressed 
products
0.8 (x250) = 200 0.8 (x25) = 20
Dimensional 
Inspection
N° of 
inspected 
products
0.6 (x250) = 150 0.6 (x25) = 15
Cost of the lot =
916.55
Unit Cost of the
product = 3.67
Cost of the lot =
89.2
Unit Cost of the
product = 3.57
N° of manual 
movements
Fig. 7.10 Cell cost detail according to ABC
7.8 Lean Accounting and Value Stream Accounting 137
and standard costs cannot exist. This aspect became important in traditional
accounting, especially when linked to budgets. In traditional accounting, cost
reduction is linked to direct labor time because indirect costs are not calculated or
defined accurately. When striving to reduce product cost and maximize the use of
raw materials, the focus is on cycle time and standard costs. During mass produc-
tion this concept was surely perfectly logical because it works with large lots and
indirect costs; nowadays, however, a lot of waste lies hidden among indirect costs
and cycle time should be designed to work with takt-time. Another less obvious
aspect is that standard costs and cycle time worked for Taylorism, when workers
were heavily specialized in one activity; it works less, however, for cells/processes,
which need to be balanced and require a lot of flexibility. To cut a long story short,
to be able to focus on the Value Stream, the concept of standard cost needs to be
discarded because it does not allow waste reduction.
7.9 Value Stream Accounting
Value Stream Accounting is an accounting system based on the Value Stream
according to the concepts explained in the previous section. Value StreamAccounting
is also known as Lean Accounting or Lean Cost Management. In fact, ABC
accounting did not make distinctions between direct and indirect costs because all
costs were considered direct within the process. However, when applying ABC
accounting, all processes have to be divided into activities, a driver has to be
identified for every activity, and all costs of all activities need to be added up.
Table 7.5 Mass production Vs Lean organization
Target Mass-production paradigm Lean organization paradigm
Customer
service
Large amounts of stock make good
service possible
Stock represents immobilized capital, risk
of obsolescence, limited space, and so
on. High service is guaranteed by a
“tight” Value Stream flow
Marginality Plants used to a maximum; capacity
excess is waste
Plants produce according to customer
demand, respecting takt-time.
Maximum plant use thanks to
Heijunka leveling. Marginality is
linked to lead time. A low residual
capacity may help provide a flexible
response
Lot or product
cost
calculation
Lot/product cost needs to be
calculated as the sum of all cost
centers and overhead costs
Complex software based on standard
costs is necessary
Costs calculated using traditional
accounting do not make waste in the
Value Stream visible. Lean requires
that all costs be direct to the Value
Stream. There are no standard costs;
the only important target is reducing
lead time
138 7 Lean Metric, Lean Accounting and Value Stream Accounting
In Value StreamAccounting, this complicated calculation does not take place; in fact,
all costs external to the Value Stream are not taken into consideration and all direct
costs within the period are simply added together.
When calculating cost for one working week, the Value Stream absorbs costs of
raw materials and unfinished products from suppliers or other departments, labor of
all staff involved, amortization of all plants, machines and tools. To better under-
stand this concept, which may seem a little chaotic, some basic principles need to be
introduced. First and foremost, Value Stream Accounting is strongly linked to Lean
Organization, and the more accurately Lean has been implemented, the easier it is
to apply Value Stream Accounting. In fact:
• Total cost is calculated within the whole Value Stream, and not for single
departments, cells, cost centers, and so on.
• Staff members should be assigned to oneValue Stream, otherwise staff costs need
to be divided into different Value Streams, and this can cause complications
similar to those in ABC.
• The Value Stream obviously has to include product marketing and design, sales
and purchases, and so on and staff have to be dedicated to Value Stream codes.
Thus marketers, designers, sales managers and so on should work on products
that only concern one Value Stream.
• Stock within the Value Stream should be kept at a minimum to avoid having to
calculate its cost.
• Large ovens, machines or plants that are used by various codes can complicate
calculations considerably because their cost then needs to be divided according
to the time spent per product.
• Costs linked to quality (quality management, inspections, laboratories, etc.) need
to be kept low, in other words defects need to be kept to a minimum; otherwise,
costs of poor quality need to be calculated and added to the products concerned.
When the abovementioned terms have been fulfilled and the Value Stream has
been redesigned according to Lean, Value Stream Accounting becomes extremely
accurate and easy to apply. It is sufficient, in fact, to sum all costs absorbed by the
Value Stream in a certain period (usually 1 week) and, if the unit cost is required,
divide the total by the amount of products produced in that period.
According to Lean, standard cost is not a helpful piece of information; added
value and the Value Stream are more of use because they indicate where to take
action in order to reduce non-value-added activities. However, it is important to
remember that although this type of calculation may be simplified, overenthusiastic
approximations may cause problems. The following should always be taken into
account when applying Value Stream Accounting:
• During the initial stages of Lean Organization, costs linked to stock and defects
can beunderestimated; some products may present more defects than others.
• In smaller companies, or companies that produce a small amount of products
(e.g. automatic machines or large industrial plants), design costs can vary hugely
7.9 Value Stream Accounting 139
between orders; this aspect is further complicated by the fact that designers
usually do not focus on one single Value Stream.
• Usually in smaller companies it is virtually impossible to find staff or machines
that work on only one Value Stream. Thus a cost distribution driver needs to be
identified so that cost can be divided into the different Value Streams.
Basically, Value Stream Accounting is an accounting system for organizations
that have stabilized their processes thanks to Lean and keep the Value Stream at the
center of attention. If this is not the case, ABC logistics need to be applied to divide
those costs that are not completely direct costs to the Value Stream. The few
companies that have applied Value Stream Accounting recommend the following
approach:
• Immediately abandon all concepts regarding standard costs and monitoring
whether or not these are being kept; accounting should measure improvements
and Kaizen actions should be assigned to Value Stream supervisors;
• Rapidly introduce Lean and Lean indicators, especially lead-time reduction, in
all Value Streams;
• Apply Value Stream Accounting with adequate corrections regarding costs
external to the Value Stream.
Value Stream Accounting thus reflects the value stream and should respond to
all its needs.
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140 7 Lean Metric, Lean Accounting and Value Stream Accounting
Chapter 8
Lean Office
The more we do, the more we can do
William Hazlitt
8.1 Introduction
In the previous chapters Lean Organization has been described as a system that
should be applied to the whole organization. Manufacturing companies that strive
to implement Lean, or similar systems like Six Sigma or TQM, tend to start working
on processes in manufacturing because these seem to hide a lot of waste. If WIP is
equal to half of turnover within the productive process, there is certainly a problem
linked to turnover calculation; in this case, problems concerning slow customer
service are considered less urgent. These problems may not be urgent but they
certainly must not be forgotten. A company does not have unlimited resources and
inevitably priorities must be set.
Sometimes, however, the focus should be on problems within service processes,
rather than concentrating on pure manufacturing processes. Many manufacturing
companies typically start by standardizing components within product design, or
Design For Assembly-Design For Manufacturing (DFA-DFM) improvement of
industrialization. This is because introducing U-cells through Group Technology,
for example, can prove complicated when products are radically different and
components have not been standardized. These projects are typical within Lean
Office, a subject discussed in further detail in the following sections.
8.2 What is Lean Office?
The following example should explain the concept of Lean Office more clearly.
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_8,# Springer-Verlag Italia 2013
141
Example of Lean Office Applied to a Public Authority. A public authority
decided to apply Lean Office to its front office to better deal with citizens. When
viewing this office, the first thing that can be noticed is that all desks and
workplaces seem to be incredibly tidy. A 5S project took care of organizing all
documents into folders that are easy to find, and placing documents still waiting to
be processed into colored drawers that make it possible to measure WIP.
The photocopying machine has a preventive maintenance plan and all downtime
is measured accurately. The office manager proudly declares that applying Lean
Office has greatly improved work within the office; he could not, however, give any
information regarding lead time reduction.
The project definitely led to benefits in terms of increase in productivity and
decrease in mistakes, however, no improvements in terms of customer service
could be measured.
The example illustrated above lists some Lean Office principles. Lean Office
should however not be a forced implementation of manufacturing methods within
the service industry; applying SMED to a bagging machine would probably not lead
to any economic benefits for the company.
Another Negative Lean Office Example. In an office of a leading European
organization, obsessed Lean consultants applied 5S and marked the exact position
of where the phone should be with colored tape, rather than indicating where a chair
should be placed after use.
These activities are not really value-added, and results cannot really be
measured; the only benefit would probably be the introduction of discipline and
awareness regarding Lean principles because it is really rather impossible to lose a
phone within an office. In service and service processes, waste reduction is often
linked to intangible aspects that are particularly difficult to spot. The service
industry is based on “transactions” rather than physical handling operations. The
word transaction comes from Information Technology (IT) and was slowly adopted
by the service industry, whose operations are increasingly based on IT methods.
Transactions are the most basic of all service operations, and are similar to
operations which lie at the core of manufacturing. An office that manages supplies
and inventory, and uses web-banking to pay suppliers, is based on data transaction
between two databases. Similarly the signature of a public administration director is
a vital transaction within the whole process. In Lean the term transactional process
is often used to indicate those processes that are based on transactions.
Lean Office is simply removing waste and increasing added value within the transactional
processes.
What are the innovations introduced by the traditional Lean method in the
service industry? This author directly observed Lean application through various
methods and believes that innovation is less than expected.
Specific Lean methods such as SMED, 5S, Kanban and TPM lead to limited
benefits and apart from good common sense (increased thanks to 5S and U-cells),
Lean is often forced onto the service industry. If there is an increase of technology
142 8 Lean Office
within the process, these traditional methods become more useful. ApplyingSMED
or TPM to a financial consultancy office is quite pointless; applying these methods
to an operation theatre, however, can lead to important results.
Value Stream Mapping (VSM) and Makigami are two useful methods that can
help identify and remove waste within the service industry. VSM is a pure Lean
product, and tends to lose importance when applied to the service industry because
WIP is equal to less frozen capital and can be transformed in terms of cycle time
(Little’s law). A VSM triangle indicating that a director is behind schedule by 50
documents that need to be reviewed and signed means, in a Makigami process, that
this activity will require 1 month. The main difference between the two methods is
that Makigami is better suited to the types of processes in the service industry.
Makigami, however, is not a tool invented by the traditional Lean Organization.
Many mapping systems have been designed since the 1980s, when the principles of
Business Process Reengineering were introduced, to improve transactional pro-
cesses, including: cross-functional flowchart, metrics-based flow (MBF) or metrics-
based process map (MBPM). These methods make mapping easy and improve
Makigami considerably. Together with VSM, they are among the most efficient
methods to identify and reduce waste.
8.3 Waste in Transactional Processes
In Chap. 2, the seven types of waste according to Lean were listed and discussed,
including examples of how these concepts could be applied to the service industry.
Waste in the service industry can lie hidden among files waiting to be processed,
documents that require signatures, emails that have not been read, customers
waiting in queues, and so on. Traditionally the seven categories of waste defined
by Taiichi Ohno can be applied to the service industry; however, many authors offer
a more modern set of categories, tailored for the service industry, which decrease
the added value of transactional processes. Figure 8.1 shows a waste classification
designed after a Kaizen workshop applied to transactional processes; this method
classifies 10 types of waste that are more suitable to the service industry.
The organization should first identify waste, using the mapping methods
described in the following sections, and then set strategic targets. Having defined
the priorities, the team can apply a Kaizen workshop to improve the service flow
and reduce waste.
8.4 Mapping Service Flow and Identifying Waste
To start identification of the 10 types of waste listed in Fig. 8.1, the first vital step is
to map out the process flow. The map should refer to one single service, family of
services, procedure, and so on, because one single service can be extremely
8.4 Mapping Service Flow and Identifying Waste 143
Type of waste Description Possible causes
Processes carried out ahead of 
or behind schedule 
Data, documents or 
information are being 
processed either too 
quickly or too slowly and 
do not comply with the 
schedule.
This can lead to an 
increase in process length 
because it means that 
activities are not balanced.
Badly managed schedules 
or priorities
Unbalanced activities 
within the flow
Staff not employed 
correctly
No teamwork
Insufficient awareness and 
inability to regard the 
process flow as a whole
Inefficient software
Strikes or excessive 
absenteeism
Staff having to wait Staff having to wait before 
processing documents, 
data, and so on.
Unbalanced activities 
within the flow
Staff not employed 
correctly
Broken machines within 
the office
Slow activities/processes Activities/processes that 
have an output that is 
inferior to the target.
Unbalanced activities 
within the flow
Incompetent staff
Broken hardware
Inefficient software
Pile-up of information or data 
that requires processing
WIP which builds up when 
activities are not balanced 
or the flow has slowed 
down or stopped for 
whatever reason.
Unbalanced activities 
within the flow
Incompetent staff
Broken hardware
Inefficient software
Strikes or excessive 
absenteeism 
Defects and mistakes Mistakes during service 
implementation which 
mean that the 
operation/transaction needs 
to be repeated.
Inefficient inspections
Missing standards
Incompetent staff
Defective 
hardware/software
Fig. 8.1 (continued)
144 8 Lean Office
complex and can include various customers, suppliers and different kinds of
processes. Consider the example of a health service operative unit; the patient is
part of the therapy process and moves back and forth between the unit and other
operators, which can be other patients or suppliers. If the patient enters the unit
through the Emergency department, possible next stops could be the X-ray unit, or a
laboratory, or back to Emergency to be moved to a different department.
Customer complaints Mistakes that reach the 
customer, causing costs of 
poor quality and loss of 
image.
Incorrect information 
regarding customer 
demand 
Inefficient inspections
Missing standards
Incompetent staff
Defective 
hardware/software
Service exceeds the customers' 
requirements
Service implementation 
that exceeds the customers’ 
requirements. Often this is 
not considered a bonus and 
can be a real problem.
Incorrect information 
regarding customer 
demand
Duplications within the process This type of waste is 
typical in the service 
industry, where many 
procedures are often 
carried out twice, or data is 
processed both on paper 
and on a computer.
Incorrect service flow 
design
Missing standards
No teamwork
Insufficient awareness and 
inability to regard the 
process flow as a whole
Inefficient software
Excessive staff movements Members of staff that need 
to move around a lot to be 
able to carry out their job.
Incorrect layout and 
service flow design.
Unnecessary transport This type of waste could 
be, for example, having to 
move documents from one 
office to another, or 
forcing a customer to move 
from one office to another 
one
Type of waste Description Possible causes
Fig. 8.1 The 10 wastes inside the service industry
8.4 Mapping Service Flow and Identifying Waste 145
In this sense the Value Stream should be viewed “holistically”, meaning that if
some aspects are not taken into consideration, important information can go
unnoticed. Several authors, when discussing this “holistic” approach applied to
complex procedures within the service industry, use the term System Thinking
to indicate how a process should be divided into processes within one office,
department, and so on.
Suppliers-Inputs-Processes-Outputs-Customers (SIPOC) can be a useful tool
used together with mapping to evaluate the input and output of a complex process;
SIPOC was developed within Six Sigma. This method helps define suppliers,
customers and customer requests before embarking on the proper Value Stream
or process analysis. Figure 8.2 is a SIPOC diagram that describes the Value Stream
of expensive and dangerous antiblastic drugs purchased by a hospital and
distributed within said hospital.
As explained above, if an analysis of frozen capital or machine/process change-
over time is required, the classic Value Stream Map discussed in Chap. 3 is
certainly suitable. In the case of the antiblastic drugs, the Value Stream Map in
Fig. 8.3 (or Fig. 7 of Chap. 3) was used by the team to introduce improvements
regarding stock in preparation centers and to improve health and safety for workers
handling these drugs.
The stock symbols (triangle) were hiding the fact that large amounts of these
drugs were moved from the pharmacy but were, however, not being used
completely, causing a heavy loss of money (one vial of these drugscan cost up to
several thousands of euros). By reducing preparation centers and re-engineering the
process with a Lean Six Sigma project, the company saved two million euros and
improved health and safety conditions for workers. These drugs can, in fact, cause
burns and other damage to skin and tissue.
Suppliers Input Processes Output Customers
External drug 
supplier
Drug lots Drug kit Manipulation
centers
General 
Management
Purchase budget Detailed Value
Stream flow
Drug preparation Departments that
require the drugs
Operative units Purchase program Drug 
administration
Patients
Operators 
responsible for 
transportation
Department 
demand
Fig. 8.2 SIPOC of antiblastic drug management
146 8 Lean Office
The VSM above, very schematic because all confidential data had to be omitted,
was used to analyze the amount of drugs required and the amount of frozen capital.
Makigami, by contrast, is more suited to analyzing time and value-added activities
in further detail. Makigami is often applied to both manufacturing industry service
processes (e.g. marketing, customer assistance, administration, purchases, etc.) and
to companies working in the service industry, including public administration.
Makigami is often used together with VSM, especially when the VSM in
question:
• Indicates the presence of macro processes, which can be split into a series of
activities/transactions carried out by several different members of staff;
• Does not indicate the causes for delay or any defects within the process.
Makigami is known as metrics-based process map (MBPM) or metrics-based
flow (MBF) in the USA; these systems do not differ greatly from the original
Japanese system.
Makigami should be carried out during a Kaizen workshop, during which a team
analyzes all Value Stream activities in great detail, splitting activities into smaller
ones when required and identifying all activities and the more important metrics.
Makigami is often completed by using several flipcharts linked together, a method
Fig. 8.3 VSM of antiblastic drug management
8.4 Mapping Service Flow and Identifying Waste 147
often used to also fill out VSM. Similarly to VSM, Makigami is filled out for two
different situations:
• Current state: the process as it is currently;
• Future state: what the process should look like after application of reverse
engineering.
The correct application of Makigami follows only a few very simple rules:
The workshop should be carried out near to the process undergoing
improvement.
• The team should contain members of staff who work on the process on a daily
basis.
• Other team members could be, for example, internal or external customer-
supplier representatives.
• Any data regarding activity times, complaints, claims, defects, and so on, should
be collected beforehand.
• A Kaizen workshop planner should be prepared beforehand. Makigami, including
future-state and reverse engineering, should not take longer than 7–8 days; in
addition, there should be no temporal discontinuity between future state mapping
and implementation of improvement projects.
The team, in addition to flipcharts, also requires several other items of
equipment:
• Colored highlighters;
• Colored sticky notes;
• A computer to carry out calculations and to record minutes taken during
meetings.
To begin with, all flipcharts should be pinned to the wall, and the first sheet on
the left needs to be filled in with a column containing all functions that participate in
the process flow. Depending on the complexity of the flow, functions of one single
office/service/department can be recorded; alternatively, stakeholders such as
external suppliers, customers or other offices can be related. Dividing the column
according to stakeholders is the method most suitable to System Thinking logistics,
and is frequently used in public administration and public health services. In service
processes in manufacturing, Makigami is broken down into functions, although
links to other offices or departments are always included, especially in large
companies. Figure 8.4 shows an example of a basic Makigami.
The example schematically shows the flow of the approval of a new production
component, which also concerns the engineering group located in the USA. Each
gray square indicates a sticky note used by the team to identify an activity. Arrows
indicate the direction of the flow and exchanges between functions. The team has to
decide each of the following for all activities/transactions:
148 8 Lean Office
• Is the activity value-added?
• Is the activity not value-added but necessary (N) due to laws or other
regulations?
• If the activity is neither value-added nor necessary then it is surely waste.
In the example shown in Fig. 8.4, final sign-off by the engineering group does
not add value (for the customer), but it is, however, necessary according to the
company guidelines and American product safety standards.
The activities that truly add value to the process are those that can then be
improved by reducing time and problems linked to quality. Activities that do not
add value and are not necessary obviously need to be removed. As in VSM, in the
Functions
Stakeholders
Marketing
Feasibility
approval
N
Overseas
Product
Process
Production
engineering
engineering
engineering
New product
or change
required VA
Activity/transaction
Design and DFM– DFMEA
Process
sign-off
N
PFMEA
Process layout
and work
instructions
DFABOM issue
VA VA
VA
VA
VA
PT = 4h
%C&A =
LT = 20d LT = 8d LT = 8d LT = 2d LT = 1d LT = 4d LT = 6d LT = 15d
0.78 0.78 0.80 0.90 0.96 0.67 1
PT = 5h PT = 5h PT = 5h PT = 5h PT = 4h PT = 1hPT = 20h
Process time = 49 hours; lead lime = 64 days = 512 hours
PT/LT = 0.096 (9.6%); %C&A = 0.28 (28%)
Activity completeness and accuracy percentage = C&A; lead time = LT; process time = PT;
VA = Value Added activity; N = Not value added activity
Fig. 8.4 Makigami: current state AS-IS
8.4 Mapping Service Flow and Identifying Waste 149
lower part of the document, process time (PT) and lead time (LT) are recorded and
can be compared in order to roughly understand how much value-added is provided
by the process. For instance, Fig. 8.4 shows a 9.6 % ratio between PT and LT. LT is
the total activity time and sums up both proper PT and delays caused by quality
problems, duplications, handling, and so on. Indeed looking at the results, activity
completeness and accuracy percentage (%C&A) is very low. Multiplying the
different %C&A the result is a poor 29 %. That means that at the end of the process
merely 29 % of information/data is processed “at the first time” with no mistakes. A
more “Japanese” version of Makigami uses green sticky notes for added-value
activities and red sticky notes for activities that do not add value, whether they are
necessary or not.
8.5 Indicators and Metrics for Lean Office
In Makigami, to best underline the improvements obtained after the Kaizen work-
shop, metrics to adequately measure the said results need to be introduced.
The main improvement indicators, PT and LT, are shown in the lower part of the
Makigami. PT measures the real amount of time a process takes up, and is the
equivalent of cycle time (CT) in production processes. LT is PT added to other time
spent during the activity; LT is measured from the second the information/data/
document/file is available to be processed and continues measurement up until it
has been processed and dispatched. Obviously PT and LT need to be reduced as
time goes on. Another important measurement is %C&A that measures how much
the results are complete and accurate.
The %C&Aindicator measures the percentage of times the downstream cus-
tomer process received information/data/files/documents that were incomplete or
contained mistakes. Finally, another important indicator of improvement and team
success is the reduction of:
Number of steps (or sticky notes) on the map.
These are basic indicators, and obviously new indicators linked to the peculiarity
of the process can be introduced. In the case of Fig. 8.4, the LT needs to be reduced,
which for a technical office is the so-called time to market.
Overall Equipment Effectiveness (OEE) is another useful indicator that was
introduced in the previous chapter; this indicator can be introduced to all types of
processes in both the manufacturing and service industries.
Various authors have renamed OEE when applied to Lean Office as Overall
Professional Effectiveness (OPE) or Overall Office Effectiveness (OOE). Because
OEE can be applied to the concept of process (regardless of whether or not the
process involves machines), a good indicator could be OPE (Overall Process
Effectiveness), and the three indicators availability, efficiency and quality could
be readapted to the service industry. Since availability is linked to the concept of
downtime, in the service industry it could indicate problems linked to software,
150 8 Lean Office
internet, computers, machines, and so on, but also disruptions such as colleagues,
customers, unexpected meetings, phone calls, and so on. Figure 8.5 sums up the
three indicators, together with examples from service processes or Lean Office.
The following examples come from a public administration office and a bank
counter; they may help explain the concepts listed above.
Examples of How to Calculate OEE in Lean Office. A local authority office that
processes funding requests is open to the public 5 h every day. One day a problem
blocks the system and a worker spends 1 h solving the problem. That same day the
worker manages to keep to the five document per day standard (takt-time), however
OPE indicator Examples of causes that could influence the indicator negatively
Availability
Effective working 
time/Total time 
available
Inefficient Service Level Agreement (SLA) for internet and 
management services 
Unexpected computer breakdown
Other machinery breaking down
Customers that do not respect business hours
Colleagues/customers that do not hand over documentation on time
Emergency meetings
To many breaks
Strikes
And so on.
Efficiency
Production rate/Ideal 
production rate
Inadequate staff productivity (even if availability is 100%)
Incompetent staff
Inefficient equipment (e.g. slow computers, slow machines, etc.)
Inadequate procedures
Quality
Quantity of products 
processed without 
defects/Total quantity 
of products processed
Process mistakes, claims, complaints, and so on.
Fig. 8.5 OPE for services
8.5 Indicators and Metrics for Lean Office 151
a mistake in the calculation of contributions causes a complaint and one document
needs to be reprocessed. In this case:
availability ¼ 4=5 ¼ 0:8;
efficiency ¼ 5=5 ¼ 1;
quality ¼ 4=5 ¼ 0:8;
OPE ¼ 0:8� 1� 0:8 ¼ 0:64 ð64%Þ:
A bank consultancy counter that takes care of making loan quotes is open 7 h
every day. The takt-time of a consultant is one customer appointment per hour;
however, 1 day, one customer does not show up and the consultant wastes 1 h
waiting. The consultant is not too familiar with loans and only manages to complete
4 out of 6 customer requests (not counting the customer that did not show up) and
postpones the remaining two to the next day. There were no mistakes in this case,
and OPE is calculated as follows:
availability ¼ 6=7 ¼ 0:86;
efficiency ¼ 4=7 ¼ 0:57;
quality ¼ 4=4 ¼ 1;
OPE ¼ 0:57� 0:67� 1 ¼ 0:49 ð49%Þ:
The same analysis carried out for the manufacturing industry can also be applied
to offices and services, whichever indicator the company may choose to apply. The
indicators should be measured on a day-to-day basis and should be available to both
managers and workers. In processes where stock is not represented by actual objects
but by emails, documents, phone calls, and so on, Visual Management and Control
principles become absolutely vital. An office that manages appointments between
customers and sales representatives needs to keep the amount of appointments
assigned under control; a company decided to install a simple board and cross off
all appointments that had already been set. This is a very simple but effective
method that helped keep an annual turnover target of 25 million euros, built on an
average of two appointments per sales representative per day, under control.
Visual Control and Management becomes important when discussing transactions
because transactions are often hard to visualize, possibly because many are stored on
a computer or cannot be identified as products.
Figure 8.6 shows for instance a visual management board for customers’ claims.
This company after having reduced the LT of the process using the Makigami now
answers to a customer’s claim in no more than 5 days.
152 8 Lean Office
When a claim arrives the process owner puts a magnetic tag at the cross between
the first column (registration) and the first row (0 days). After 1 day the tag is moved
from the 0 day row to the 1 day row. If the registration activity has not been done yet
the tag remains in the first column but in the second row (1 day). This means that the
process is 1 day late.
Bibliography
Durmusoglu, M.B., Kulak, O.: A methodology for the design of office cells using axiomatic design
principles, Elsevier, London, UK (2008)
Martin, J.W.: Lean Six Sigma for the Office. Taylor & Francis, London, UK (2008)
Scorsone, E.A.: New Development: What are the Challenges in Transferring Lean Thinking to
Government? Public. Money. Manage. 28(1), 61–64 (2008)
Strake, D.: Value Stream Management for The Lean Office. Quality progress 37(8), 97 (2004)
Tapping, D.: The New Lean Office Training Set. Don Tapping Publisher, MI, Kindle edition
(2009)
Tapping, D., Shuker, T.: Value Stream Management for the Lean Office: Eight Steps to Planning,
Mapping and Sustaining Lean. Don Tapping Publisher, MI, Kindle edition (2002)
Registration
START OF THE
PROCESS
Analysis Laboratory Report Customer
answer
Completed
claims
Fig. 8.6 Visualizing transactions and Visual Control (Courtesy ABB Sace)
Bibliography 153
Chapter 9
Management of a Kaizen Workshop Carried
Out in Ducati Motor Holding
The following paragraphs will illustrate the application of a typical Kaizen work-
shop, carried out according to the guidelines explained in Chap. 5. The workshop,
mainly focused on applying 5S and Kanban, took place in the Ducati Motor
Holding plant located in Italy.
All the following material was generously offered by Mr. Galimberti, senior
consultant at Chiarini & Associates, who “coached” the Ducati team. Many thanks
to Ducati’s managers Davide Abate, Franco Lanza and Pietro Palma and, last but
not least, the intern Mr. Copelli.
9.1 Workshop Preparation and Targets
The workshop was carried out following a strict time-schedule and preset goals and
targets. The main target, included in the company’s strategic plan, was a 15%
decrease in working capital in value stream and manufacturing. In accordance, the
following goals were set:
 Redefinition and decrease of WIP;
 Detection of bottlenecks and general efficiency improvement;
 Reduction of overall lead time of the two production lines involved;
 Detect which areas contain WIP;
 Increase awareness regarding Lean methods and introduction of waste concept.
To begin work, a team needs to be assembled and a team leader has to be chosen.
The guidelinesin Chap. 5 stressed the importance of choosing an able leader with
certain traits; in this case a consultant was elected as the team leader. Six other
members, most of who were from manufacturing, completed the team.
Once the team had been chosen, a kick-off meeting ensured that all members of
staff were familiar with the action plan and methods involved. The plan was split up
into the following activities:
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_9,# Springer-Verlag Italia 2013
155
 Area involved;
 Targets;
 Codes and sales analysis;
 Current state VSM, WIP/lead time/completion rate/OEE;
 Identifying WIP areas in the warehouse;
 Definition of vertical and horizontal driveshaft symbols;
 Amount of driveshaft WIP.
Having already defined the area and targets, the team commenced code and sales
figures analysis.
9.2 Code and Sales Figures Analysis
By analyzing code and sales figures the team reached a decision regarding how to
structure flow, machine and worker shifts; it also led to the decision to implement a
Kanban or Built to Order (BTO) system. The team had to manage nine motor codes;
these codes have been renamed with the letters A to I to protect company privacy.
Eight camshaft codes were assigned to four 2-valve motors and 20 codes were
assigned to five 4-valve motors. Code analysis showed that Kanban could be
applied to several motor codes that had a much higher demand.
9.3 Current State Flow
Having decided whether to apply Kanban or BTO, the team proceeded to analyze
the current state of production and define the data necessary to complete the next
step. The team mapped out the current flow of manufacturing in the following two
Value Stream Maps.
The driveshaft total lead time was 24.1 days and the total of process lead time
was 149.7 h. The camshaft had a total lead time of 11.4 days; process lead time
was 19 h.
The VSM also showed that the process was mainly managed by the head of flow,
assisted by the supervisor and the head of internal logistics; this caused a push type
of management and fluctuating WIP progress, thus greatly increasing lead time.
The two lead times were calculated using the following two formulas:
Total lead time ¼ WIP=completion rate
Process lead time ¼ Lot=completion rate
The completion rate is the number of products produced by a cell in an hour; this
obviously varies according to demand (Figs. 9.1 and 9.2).
156 9 Management of a Kaizen Workshop Carried Out in Ducati Motor Holding
Suppliers
6 rolling months –
1 confirmed month
Once a day
Logistic Department
Production control
Forecast demand
Internal
customers
Production
management
AS 400
Lead Time
External
customers
Cycle Time
24.1 d
105.7 h
Lathe and
grinder
Drilling Toothing Grinding internal heat
treatment
Finishing Piston rod
3.39
d
18.1h 14.2h 7.8h 28.2h
5.02d 1.58d 1.36d 2.24d 2.07d 1.19d
21.49h 7.05d8h 8h
Kanban
implementation
Fig. 9.1 Current camshaft VSM
Suppliers
Forecast
Pull
Logistic Department
Production control
Forecast demand
Internal
customers
External
customers
Production
management
AS 400
Heating
Treatment
Lead Time 11.4 d
19 hCycle Time
FIFO
FIFO
End Milling Turning Drilling Milling and
Drilling
Grinding
2.3d
3.3h
1.05d 8h+1.36d
2h 2h 3h0.7h
0.74d 5.8d
Visual
Management
WIP
Fig. 9.2 Current driveshaft VSM
9.3 Current State Flow 157
9.4 Definition of Inventories Between Processes
Defining inventories between processes may seem a simple task but it is, however, a
very delicate step. The team carefully analyzed where pallets could be loaded and
unloaded to cause minimum encumbrance and, at the same time, be as quick and
convenient as possible. This analysis was mainly carried out by studying the
manufacturing layout, which made it easy to evaluate where such areas should
be best placed. The designated area drawn on the floor had to be big enough for the
pallet in use, and a vertical marker should indicate the maximum amount of lots that
Fig. 9.3 The driveshaft supermarket
158 9 Management of a Kaizen Workshop Carried Out in Ducati Motor Holding
can be stacked up to avoid pointless queues and WIP. Obviously this limit should
vary according to market demand fluctuations.
9.5 Introducing Kanban in the Driveshaft Process
Having calculated the production lot, the team moved on to deciding how to
introduce Kanban. The VSM shows that the product follows the route described
as follows:
 Codes are sent from the warehouse;
 Production commences at cell 1 and finishes at cell 5;
 Once the codes have been checked they are stored in the driveshaft supermarket,
where workers can withdraw the finished products (Fig. 9.3 is a photo of said
supermarket).
Having defined the route, the team could now decide on how to apply Kanban.
Several problems emerged, including:
 Tags need to be continuously updated;
 Withdrawals and work orders need to be reported well in advance.
To deal with these problems, the team opted for colored tags (a different color
for each code) with the Kanban serial number and the date (which had to be
recorded manually).
Two boards were set up, one before cell 1 and one after cell 5; the tags were then
placed accordingly. A worker picks up a certain code from the supermarket and the
tag specific to the code is sent to the board upstream, thus indicating that one lot
of that code needs to be produced. When production begins the worker writes on the
tag the date that production began and sends it to the board downstream. After
the equivalent of lead time has passed, a new lot should be ready and waiting to be
withdrawn, together with a new tag; this tag will be sent back upstream when the lot
is withdrawn to request the production of a new lot (Fig. 9.4).
9.6 Managing Camshaft Production
Having defined the driveshaft Kanban, the team moved on to applying Kanban to
camshaft production. The camshaft had five cells for the 4-valves cam production
and five cells for the 2-valves cam production; a couple of cells could work
indifferently for one or the other. In addition there were internal and external
thermal treatments, final inspection and a supermarket where workers had to
withdraw the codes necessary for production.
9.6 Managing Camshaft Production 159
Production management is very similar to the previous case: workers withdraw
one lot from the supermarket (Fig. 9.5) and the Kanban tag is sent to the upstream
board to signal that production should begin. Once production begins, the Kanban is
sent to the downstream board and after the necessary lead time has passed one new
lot is ready. The only difference is the amount of codes (and colors) involved.
Calculating the amount of tags necessary is carried out as before and will be
explained in more detail in the following section. Figure 9.6 is a photo of the
upstream camshaft board.
Fig. 9.4 The upstream driveshaft Kanban board
160 9 Management of a Kaizen Workshop Carried Out in Ducati Motor Holding
Fig. 9.5 Camshaft supermarket
Fig. 9.6 Upstream Kanban camshaft board
9.6 Managing Camshaft Production 161
9.7 Calculating the Amount of Kanbans
To calculate the amount of Kanbans necessary the team applied formulas similar to
those explained in Chap. 6. The precise formula in this case is:
N� of Kanban ¼ [(demand [products=day]) � ðlead time [days�Þ þ lot
þ emergency spares�Quantity per container
Considering that:
 The demand refers to a prediction for the next year;
 Lead time has been calculated correctly;
 The lot has beencalculated too;
 The emergency spares have to be kept at an absolute minimum and should only
be used in case of delays or defects;
 The quantity per container is the amount of products in the container.
This calculation is repeated for every code of both camshaft and driveshaft
production.
Fig. 9.7 WIP area near cell 1
162 9 Management of a Kaizen Workshop Carried Out in Ducati Motor Holding
9.8 WIP Areas
Having organized Kanban, the team started working on defining areas for inventory
between processes; these areas include all those designated to store unfinished
products, empty trays, defect products, and so on.
The best solution proved to be colored rubber tape on the floor: yellow for
inventory and red for defect products. Obviously the size of the area had to be
measured according to the size of the pallets. The rubber tape was later replaced by
paint.
Starting off with the driveshaft cells, the team decided that an area big enough
for 10 pallets would be sufficient and necessary to manage various codes; this area
was chosen near cell 1. Because one lot contains 108 products, the team designed
Fig. 9.8 Corridor near cell 1 of camshaft production
9.8 WIP Areas 163
two areas near machine loading and two areas near machine unloading for each cell,
thus avoiding overproduction and keeping working capital at a minimum. If the
area near the downstream cell is full, the whole production stops (Fig. 9.7).
Similarly, the areas for camshaft production were selected together with the
workers to improve ergonomics and health and safety. Key points to remember are:
 Emergency exits have to be kept clear;
 Inventory areas should not be placed in or near corridors;
 The area should be as near as possible to the cell but without limiting workers’ or
machine movements.
An example may illustrate the last point more clearly. The team noticed that one
worker removed the products from the tray and placed them in the machine;
afterwards the products were checked for size and placed back in the tray. Placing
the tray on the left-hand side or on the right-hand side does not seem to make a great
difference, but in this case there was a difference of around a meter per product in
terms of movement, easily several kilometers per year (Figs. 9.8 and 9.9).
9.9 Inspection and Workshop Results Presentation
On the final day of the workshop the team reported all results to management; the
team leader explained the results and provided a new VSM, underlining the
decrease in lead time and working capital. In fact, there was a total decrease of
over 20 %, beating the target of a 15 % decrease.
Fig. 9.9 Example of WIP areas in camshaft production
164 9 Management of a Kaizen Workshop Carried Out in Ducati Motor Holding
DUCATI 
MOTOR 
HOLDING 
SPA
5S audit 
checklist
Date: Page 1/2
Department:
Staff 
member:
“S” Question YES NO
S1 - U
se
1) Are there any broken or unused tools in the area? x
2) Is there an area for the finished product? x
3) Is there an area for unfinished products? x
4) Are there containers for defect products? x
5) Are there containers for personal belongings and 
instructions?
x
S2 - O
rganization
1) Are the shelves and lockers being used for tools and 
objects that are not necessary?
x
2) Are all areas clearly marked and free of obstacles? x
3) Are all documents present and where they should be? x
4) Are spare pieces being collected in designated 
containers?
x
5) Have tools and equipment been stored 
ergonomically?
x
S3 - C
leaning
1) Is the floor clean? x
2) Have cleaning rules been set for the area? x
3) Is cleaning equipment easily accessible? x
4) Are all tools in good condition? x
5) Are all documents in good condition? x
Fig. 9.10 (continued)
9.9 Inspection and Workshop Results Presentation 165
Management praised the team highly and recommended to keep implementing
continuous improvement and monitoring the results, and to strive to apply the same
concepts to different processes. To monitor the situation the team drew up a
checklist to evaluate whether 5S was still being applied (Fig. 9.10).
S4 - Standardization
1) Is the area organized? x
2) Have all members of staff received the necessary 
training?
x
3) Have management procedures been set and are they 
being followed?
x
4) Are any procedures regarding how to remove 
unnecessary material unclear?
x
5) Are there any procedures or documents that could be 
slimmed down?
x
S5 - D
iscipline
1) Are there any security aspects that have not been 
discussed?
x
2) Is all data regarding productivity, safety, quality and 5S 
visible?
x
3) Have all personal belongings been placed in the correct 
containers?
x
4) Have tools been placed back where they belong after 
use?
x
5) Has the 5S audit been carried out correctly? x
Fig. 9.10 5S audit checklist for inspections after the workshop
166 9 Management of a Kaizen Workshop Carried Out in Ducati Motor Holding
	Lean Organization: fromthe Tools of the Toyota Production Systemto Lean Office
	Preface
	Contents
	Chapter 1: From Mass Production to the Lean Six Sigma
	1.1 Once Upon a Time There was Mass Production (and Sometimes Still There Is)
	1.2 The Organizational and Productive Model of Mass Production
	1.3 The Birth of the Toyota Production System
	1.4 The Relentless Decline of Mass Production
	1.5 The Recovery of the USA in the 1980s-1990s and the Proclamation of the Toyota Production System
	1.6 The American Model of Six Sigma
	1.7 Lean Six Sigma
	1.8 The Necessity of Applying Business Excellence Models
	Bibliography
	Chapter 2: The Seven Wastes of Lean Organization
	2.1 Introduction
	2.2 Value Added and Waste
	2.3 Classifying the Types of Waste
	2.3.1 The 3 MU
	2.3.2 The 4M
	2.3.3 The Seven Relevant Wastes According to Toyota Production System
	2.3.3.1 Overproduction or Asynchrony
	2.3.3.2 Inventory
	2.3.3.3 Motion
	2.3.4 Defectiveness
	2.3.4.1 Transportation
	2.3.4.2 Overprocessing
	2.3.4.3 Waiting
	2.4 Removing Waste
	Chapter 3: Using Value Stream Mapping to Visualize Value Added
	3.1 Introduction
	3.2 Managing Value Stream for Lean Organization
	3.3 Compilation of VSM as-is
	3.4 Mapping the Future State
	3.5 Mapping at Process Level
	Bibliography
	Chapter 4: Strategic Planning: Hoshin Kanri
	4.1 Introduction
	4.2 Lean: A First Warning
	4.2.1 Examples of Mission in Lean
	4.2.2 Examples of Value Guides in Lean
	4.2.3 Examples of Vision in Lean
	Chapter 5: Kaizen Workshops and How to Run Them
	5.1 Introduction
	5.2 Introducing Lean Kaizen Workshops
	5.2.1 Programming and Preparing the Event
	5.2.2 Choosing Team Leaders and Team Members
	5.2.3 Carrying Out a Workshop
	5.3 Gathering Data
	5.4 Analyzing the Data Gathered and Implementing Solutions
	5.5 Final Check, Results Presentation and Team Celebration
	Bibliography
	Chapter 6: The Main Methods of Lean Organization: Kanban, Cellular Manufacturing, SMED and TPM
	6.1 Introduction
	6.2 Pull Versus Push
	6.3 5S Order and Cleanliness, the First Step Towards Introducing Visual Management
	6.3.1 Seiri
	6.3.2 Seiton
	6.3.3 Seiso
	6.3.4 Seiketsu
	6.3.5 Shitsuke
	6.4 The Kanban System
	6.4.1 Different Types of Kanban and Application Methods
	6.4.1.1 Production Kanban
	6.4.1.2 Signal or Triangle Kanban
	6.4.2 Calculating the Number of Kanbans
	6.4.3 The Kanban Operating Principle
	6.4.4 Using the ``Milk-Run´´
	6.5 Balancing the Process
	6.6 Cellular Manufacturing and One-Piece-Flow
	6.6.1 Designing Cellular Management
	6.6.2 P-Q Analysis
	6.7 Heijunka Board
	6.8 Quick Changeover and Single Minute Exchange of Die
	6.8.1 The Four Stages of SMED
	6.8.2 Identifying Internal and Outer Set-Ups and Preparation
	6.8.3 Converting Internal Set-Upsto Outer Ones
	6.8.4 Improving Internal and Outer Set-Up Activities
	6.9 TPM
	6.9.1 The TPM Campaign: First Step, 5S
	6.9.2 Self-Maintenance: Maintenance Carried Out by Workers
	6.9.3 Preventive Maintenance
	Bibliography
	Chapter 7: Lean Metric, Lean Accounting and Value Stream Accounting
	7.1 Introduction
	7.2 Defining Lean KPIs: Lean Metric
	7.3 Measuring Cell/Process Performance Bottom-Up
	7.4 OEE and the Six Big Equipment Losses
	7.5 Other Cell/Process Key Indicators
	7.6 Strategic and Lean Organization Value Stream Indicators
	7.7 Activity Based Costing versus Traditional Accounting
	7.8 Lean Accounting and Value Stream Accounting
	7.9 Value Stream Accounting
	Bibliography
	Chapter 8: Lean Office
	8.1 Introduction
	8.2 What is Lean Office?
	8.3 Waste in Transactional Processes
	8.4 Mapping Service Flow and Identifying Waste
	8.5 Indicators and Metrics for Lean Office
	Bibliography
	Chapter 9: Management of a Kaizen Workshop Carried Out in Ducati Motor Holding
	9.1 Workshop Preparation and Targets
	9.2 Code and Sales Figures Analysis
	9.3 Current State Flow
	9.4 Definition of Inventories Between Processes
	9.5 Introducing Kanban in the Driveshaft Process
	9.6 Managing Camshaft Production
	9.7 Calculating the Amount of Kanbans
	9.8 WIP Areas
	9.9 Inspection and Workshop Results Presentation