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Mistake #1

Welcome to this report on the Three Massive Mistakes in Lean Material Flow that you and your company should avoid. Sure, there are a lot of mistakes that can be made, not only three, but these are three big ones that have serious consequences for cost, availability and efficiency. If you are not executing these three strategies well, you’re leaving a lot of benefit on the table.

Why use the word “Massive”? Isn’t that a little over the top? Well, maybe, but if you make these mistakes, it’s virtually guaranteed that you won’t be happy with the performance of your material delivery system. So this is worth paying attention to.

Let’s start with an introduction to our subject, and the boundaries of this discussion. Lean Manufacturing design is like a bird with two wings. I’ve never seen a four winged bird, come to think of it.

One wing is what we call Process Design, which is focused on things like Standard Work, Takt Time, Resource calculation, Line Balancing, and Physical Line Layout.

The other wing is focused on the delivery of materials needed to support this line, and on the storage and presentation of these materials. Included here are setting optimum quantities for each item, container sizes, delivery route design, and material storage. We call this Material Flow, we will concentrate on this aspect of Lean design in this presentation.

So let’s jump right in and look at the first Massive Mistake: Poor Delivery System Design.

What do we mean by “Delivery System”? Think of a mail delivery route. The postman or postwoman follows a standard route, from mailbox to mailbox. The delivery frequency is Daily, except for Holidays and Sundays, so the route needs to be completed in a day.

In a factory, Material Delivery should work much the same way. A standard route is formally defined (and depending on the size of your factory you could have many routes), and material is replenished to the various Points of Use in a routine and consistent way, based on a designed Cycle of Replenishment.

Here are some of the benefits of delivering materials in this way. One, you can make the Material Delivery an extension of the line itself, running at a predictable and fixed rate. Two, you can staff your material delivery system correctly, using standard work. Three, and maybe most importantly, you can shortage-proof your line by setting your Cycle of Replenishment time to be significantly less than your Inventory Quantity. Let’s analyze what I mean by that.

Picture a simple 2-Bin Kanban system, with 1 day of material (based on average usage) in each bin. When a bin is empty, a signal is sent to Material Delivery to bring another one. In the meantime, the operator has a second bin that will last, on average, one day.

Our concern with a Kanban system like this is: what happens if we consume material faster than planned? Will we potentially run out? The answer is yes.

If, however, our Cycle of Replenishment is set to be less than one day, we can overcome variability in usage. Let’s do the math. If our Cycle of Replenishment is 2x Per Day, we can theoretically handle usage that is double the originally planned usage of 1 day. If our Cycle of Replenishment is 4x Per Day, the material delivery system can respond to an increase in usage that is four times the originally planned usage.

Assuming that the material is available for delivery, either from a Supermarket, a Warehouse, or an outside Supplier, setting the Cycle of Replenishment correctly can virtually shortage-proof your line.

What is the actual Massive Mistake #1? A failure to design formal delivery routes, with a frequent Cycle of Replenishment.

There is a lot more we could say about Delivery Route Design, but let’s move on to an introduction to Massive Mistake #2: Over-Reliance on Kanban.

I’m assuming here that your organization has embraced Lean principles, and Material Kanban is certainly one of these principles. In the early days of Lean, the recommendation was to convert as many items as possible to the Kanban method, especially “C” or inexpensive items. And that worked OK, more or less.

In recent years, however, there has been a “Sea Change” in the use of Kanban, even within companies like Toyota.

There are some weaknesses in the Kanban method, and let’s list them. First, Kanban bins at the Point of Use take a lot of physical space. In the extreme case, you would need enough room for every part used on every model. Second, operators may need to move more, if the parts are not directly in front of them. This is waste. Third, having operators select parts introduces the possibility of error, especially if the items are similar to other ones. Fourth, the selection of parts takes time. Fifth, the inventory investment is higher since you are creating a permanent storage for items that you may not need all the time.

In case that sounds a bit too negative, let me say that we still recommend the Kanban method, Toyota still uses it, and it remains a valuable tool in the Lean toolkit. But the Sea Change is this:

Lean Companies, including Toyota, are shifting towards a high percentage of parts delivered via what we call “Sequenced Delivery” or “Kitting”.

Kitting used to have a bad reputation in Lean circles, based on the perception that it added a lot of Non Value Adding effort, and it is true that kitting takes time.

However, if that kitting time can be more than offset by higher operator productivity, reduce line-side space, and improved quality, then it makes good sense.

What is the Massive Mistake here? Use a back of the napkin analysis approach, and estimate the following savings: Floor Space savings (with a cost per square foot), an estimated Productivity Gain for operators (times the number of operator labor hours per year), and the potential inventory savings. The sum is virtually guaranteed to be a big number, even if you are very conservative in your estimates.

If you don’t take advantage of this opportunity, you are figuratively flushing dollars down the toilet every day.

As always, there’s a lot more we could say here, but let’s move on to introduce the third Massive Mistake #3: Not having a Plan For Every Part.

A Plan For Every Part is a repository of data for every single item that you need to manage, for your line and for your plant. Think of it as a database that captures every data element you might want to know about a part, both manufactured and purchased.

You probably already have a similar kind of database, called your MRP or ERP system. Common ERP systems include SAP and Oracle, but there are a lot of other choices.

The problem with systems of this type is that they are really good at capturing information, but not so good at making data flexible and user-friendly. For that reason, a Plan For Every Part database is usually (in our experience) a download from a main system into a large spreadsheet. In the spreadsheet format you can slice, dice, filter and sort the data, and add new data elements at will.

Why is a Plan For Every Part (PFEP) important? This will be your primary planning tool for your Lean Material Delivery system. Included here will be your plan for containerization, for inventory quantities, for delivery strategies, and on and on. All of this information is in one place, rather than scattered around a variety of different ERP modules and screens.

If you don’t have and use a PFEP tool, it will be much more difficult to create an integrated Material Delivery system, since the information that you will need won’t be readily available.

We will be presenting more information on a Plan For Every Part in an upcoming lesson in this series, so consider this just an appetizer on this subject.

In the next chapter we’ll be coming back to the technical details of designing a Delivery system. In the third chapter we’ll come back to the PFEP topic, and show you how you would set one up for yourself.