Reducing the 8 Wastes to Shorten Lead Time and Lower Costs
Lean manufacturing and its 8 wastes of manufacturing are popularly remembered by the acronym, DOWNTIME(Defects, Overproduction, Waiting, Non-Utilization of Personal, Transportation, Inventory, Motion, Excessive Processing). Taiichi Ohno(1912-1991)of Toyota Motor Corporation first conceived the Seven wastes or Muda of lean manufacturing (the eighth, Non-utilization of personnel was added later by western companies) that have helped businesses around the world to increase productivity and reduce cost. Here we look at how reducing the 8 wastes can shorten the lead time and Lower Costs.
8 Lean Wastes and their effects on Lead time and Costs
The adoption of lean manufacturing can increase productivity and reduce cost by cutting time and increasing worker efficiency. It classifies each process as either value-added or non-value-added with the focus on reducing waste of non-value-added process activities.
In a typical manufacturing enterprise more than half of the process activities can be termed waste due to non-value-added activities. The good news is that the companies have the tools available to reduce waste. For example, if a company’s product costs are equally divided between raw materials, labor and overhead then a 30% decrease in labor cost means a reduction of costs by 10%(0.3x33.33). A great place to start the implementation of lean production is to study the effects of 8 wastes of lean production and their effects on lead time and Costs.
The defect is the deviation of a product or service from the specification. Consequences of defect are reduction in productivity, dissatisfied or lost customer, removal, remake, repackaging, and scrapping of the defective product.
There can be many causes of defects, the most important ones are listed below
Variation in operations due to lack of standardization
Variation in component assembly
Lack of maintenance of machines, equipment, and tools
Preference for quantity over quality fosters avoidance of Defect reporting
Lack of testing for the inputs and the finished product.
Defects can be reduced by the following steps
Standardization of operations
Removal of handoff
Mandatory Periodic maintenance
Quality first should be the mantra
Testing at the input and the output stage
Shortened Lead time
Defects have a detrimental effect on lead time. Defects create loops i.e defected product has to be removed, reworked, repacked. Thus the total time wasted by the defective product is the original time of processing plus removal, rework, and repackaging. Substantial shortening of lead time can therefore be achieved by a fraction of reduction in defects. This will give an enormous boost to productivity and profits.
Defects affect many costs centers. Someone is paid for the defective product, someone else is paid for the removal, reworking, and repackaging of the defective product. Packaging costs also add up due to defects. The shortfall in production is another cost of defects. These are some of the many costs associated with defective products e.g transportation of returned goods, lost customers, etc. A general rule is to multiply the cost of the scraped product by 10 to arrive at the actual cost of the defective product. Thus even a small reduction in defects will result in substantial cost savings.
Overproduction occurs when a product is produced in excess quantity earlier than it is needed. Overproduction leads to excess inventory, cash flow problems, and storage problems. Principles of lean manufacturing emphasize just-in-time methodology on both the procurement and productions side. This entails purchasing the raw material only when required and in the quantity required. Similarly making products only when ordered by the customer and in the quantity ordered.
Following are the main causes of overproduction
Poor Inventory Management
Pushing the products in the market instead of letting the Market pull the product manufacturing
Higher rejection due to poor quality
Obsession with maximum human resource utilization
Indifferent attitude toward an economic situation
Overproduction can be controlled by taking the following steps
Improving Inventor management by adopting Just-in-time methodology
Adopting pull manufacturing which lets the market demand control the production
Decreasing defects and improving quality
Making the production process less labor-intensive, more automated with a capacity to handle the maximum demand periods
Shortened Lead Time
The Customer lead time is the sum of Order lead time, Manufacturing lead time, and Supply lead time. It is the time when the customer places the order to the time the customer receives the Order. Manufacturing lead time takes up the major chunk of the Customer lead time, therefore it is obvious that any reduction in manufacturing lead time will ultimately lead to a massive shortening of customer lead time. By controlling overproduction through Inventory management, adopting demand-pull manufacturing, improving quality and automation will reduce manufacturing lead time hence the Customer lead time.
By controlling, overproduction costs may be reduced significantly by minimizing redundant Inventory through better Inventory Management and Just in Time methodology. Adoption of Demand Pulled Manufacturing reduces unsold goods inventory which reduces capital costs. Reduction in overproduction through quality improvement decreases defected or rejected product cost, which can be substantial. Automation and capacity improve productivity that reduces production costs.
The waiting waste is the time lost during product manufacturing waiting for the completion of the preceding step in a production line. There are many types of waiting e.g waiting due to shortage of parts, waiting during the time a machine is down, waiting during the manufacturing for the machine or labor to finish a process before a new process can be started, and last but not the least is wasted while the product is the stores waiting to be shipped.
Some of the main causes of waiting wastage are
Conditional Maintenance resulting in unplanned downtime
Production roadblocks and unbalanced workload
Long set up a time
Shortage of Labour/Machine capacity
Poor quality built into the manufacturing process
Lack of effective communication
Waiting for waste elimination can be achieved by adopting the following practices
Periodic planned maintenance to minimize downtime
Balanced load and synchronized process
All machines equipment should be ready for set up at the end of the day to minimize set up time the next day
Automation, large capacity adequate labor force
Regular quality audit for identifying and making processes efficient.
Effective bottom-up and top-down communication
Shortened Lead Time
By reducing the waiting waste of lean manufacturing, valuable time is saved in the manufacturing process. Time saved in the manufacturing process translates to lowering of manufacturing lead time. Since manufacturing lead time is the biggest contributor to the overall customer lead time therefore it can be inferred that reducing the waiting waste will lead to shortening of lead time
By eliminating the waiting waste, the mean time between failure of the machines is reduced which reduces the overall maintenance costs. Synchronization of the manufacturing processes leads to reducing overburdened labor force which reduces turnover rate this reduction in training costs associated with training new hires. Automation boosts the production capacity and reduces labor intensiveness in manufacturing. This helps in implementing the market-pulled production process and makes the manufacturing adjustable to the market situation that helps in controlling overproduction and the costs associated with it.
Non-Utilization of Personnel
Non-Utilization of Personnel is an intangible waste of lean manufacturing. It refers to waste of personnel; absent from a task, not able to understand the process, not utilizing their critical thinking capabilities, talents, skill-set, and knowledge. The concept of non-utilization of personnel is used to evaluate the cost of labor to the output of a process.
Major causes of non-Utilization of Personnel are as follows:
Untrained Work Force
Mismatching duties and responsibilities with qualification/skill
Burnout due to overburden
Lack of Automation
Reduction in Non-Utilization of Personnel can be achieved by the following techniques
Matching duties with qualification/skills
Set reasonable targets
Following optimum hiring models
Effective Human Resource Management
Investment in Automation
Shortened Lead Time
The Non-Utilization of Personnel is directly related to the manufacturing process. Therefore proper utilization of Personnel will lead to an efficient manufacturing process that will produce better quality products, high productivity, and shortened manufacturing lead time. Since manufacturing lead time is the major constituent of the total Custome lead time therefor we can easily say that optimum utilization of personnel will lead to shortening of overall lead time.
Studies of Optimum utilization of personnel are conducted with the sole purpose of reducing the labor costs apportioned to each product produced by the manufacturing process. Efficient utilization of manpower leads to improvement in quality of the product, lowering of lead time, controlling overproduction, and elimination of waiting in the process. Therefore optimum utilization of manpower will have a cumulative reduction in the cost of the product.
Transportation involves the movement of personnel, machines, tools, raw materials, and products, before, during, and after the production process. Transportation waste occurs when personnel, machines, tools, raw material, and products are moved frequently, unnecessarily, and further than is required.
Some of the major causes of Transportation waste are listed below
Unoptimized plant layout
Batch Flow Production
Selection of inefficient routes and mode of transport
Lack of Proactive Planning
The reduction in Transportation waste can be achieved by the following
Optimization of plant and machinery layout
One-piece flow production
Optimization of routes by Spaghetti Diagram
Shortened Lead Time
Planning is at the heart of reducing transportation waste and it involves steps taken before, during, and after the production process. Hence transportation improvement will directly affect in shortening of all the components of lead time before and after the production. Thus it can be easily said the better transportation management will lead to each constituent of the Customer lead time. i.e order lead time, manufacturing lead time, process lead time, and the supply lead time.
Transportation is one of those wastes of lean manufacturing in which the cost of the remedial actions is far less than the cost of savings achieved by them. Every meter saved in transport not only saves time but it also saves fuel costs of the transporting equipment, increases the life of the transporting equipment, manhours of the drivers and hence the requirement of the drives of this equipment.
Inventory waste can be defined as the stock of raw material, work in progress, and the finished goods held more than what is required to implement the Just-in-time methodology. Excess inventory ties up capital, hinder cash flow, increases the cost of capital and cost of raw material.
Causes of Inventory wastes are as follows
Unreliable Supply Chain
Lack of understanding of demand
Longer set up a time
Unbalanced production across processes
Reduction in Inventory level can be achieved through the following,
Buying in smaller lots
Allowing testing of new products before making bulk buying decisions
Improving process workflow
Automation of Inventory Management
Improving wastage recovery
Making contingency plans for machine failures
Shortened Lead Time
There is a direct relation between lead time with Inventory. A long lead time for raw material purchase will compel the manufacturer to order in larger quantities which will increase inventory levels. Making contingency plans with a secondary supplier in case the primary supplier is taking a long time for raw material delivery will help in reducing inventory and lead time. Similarly, improving process workflow will reduce inventory and the shortening of manufacturing lead time.
Adoption of Just-in-time inventory will reduce the size of the inventory improving the cash flow, which in turn will reduce the cost of capital. Adopting Just-in-time methodology and controlling overproduction will allow saving of capital for the purchase of goods and services on a cash basis which will decrease their cost. Efficient management of Inventory will help reduce the stock of finished goods, thus reducing their storage and transportation costs.
Motion waste refers specifically to the unnecessary movement of personnel on the factory floor. Reaching out for material and tools can also be categorized as motion waste. Unnecessary lifting and moving materials that put a strain on the body can also be classified as motion waste. Motion waste puta an avoidable burden on the human body thus causing tiredness and reduced productivity. Long setup activity also can be categorized as the setup wastes a lot of time in setting up the process rather than working on the process. Other effects of motion waste are increased absenteeism and a high turnover rate.
Following are the main causes of motion waste
Inefficient process designing
Lack of process monitoring
Lack of systematic workflows
Reduction in motion waste can be achieved by the following steps
Process monitoring on the factory floor
Highlighting process inefficiencies
Improving the layout of factory floor
Develop Standard Operating Procedures
Optimizing pick up and put away points
Reducing Change over and set up time between shifts
Implement organization, use, cleaning, and storage of tools as per SOPs
Shorten Lead Time
Developing standard operating procedures, reducing change over and set up time, standardizing tool usage and storage not only reduces unnecessary movement of manpower but also saves time by cutting the time wasted in these movements. This ultimately reduces the process lead time that is the largest component of the total Customer Order lead time, has an amplified impact on shortening the lead time.
The lowering in costs achieved through the control of motion waste, at first sight, may seem insignificant when seen as the elimination of a few steps or movements. But when steps and movements of hundreds of workers in different shifts that can be eliminated are added up it makes thousand of movements which will save a significant amount to the Company in labor cost, lower turnover, lower training cost, and cost saved by improved productivity
Excessive Processing is the unwanted value addition to a product Excessive processing may manifest itself in the form of multiple reports for the same process, multiple approvals, extra paperwork, extra meetings with irrelevant people in attendance, and tracking the same process in multiple systems. Excessive Processing may reduce workers’ motivation that may lead to reduced efficiency. Furthermore, excessive processing becomes a financial burden for the organization with counterproductive activities.
Excessive Processing is mainly caused by
Lack of clear specifications
Lack of clear instructions
Lack of Standard Operating Procedures
Absence of review and refining of processes with time
Absence of clear communication
Reduction in excessive processing may be achieved by
Devising Standard Operating Procedures
Reviewing and refining of processes
Adoption of simple processes
Loosened machine operating guidance
Shortened Lead time
With Standard Operating procedures, improved process design, and loose machine operating guidance the floor workers will be able to save considerable process time which will have a substantial impact on the shortening of Lead time. Quick approvals, cutting down unnecessary paperwork, eliminating counterproductive meetings may also reduce time and improve efficiency.
With each step taken to reduce the excessive processing, there is a corresponding reduction in the non-productive waste, resourceful time of the workers. and the management. As a result of loose specification, guidance workers can adopt simple and cost-effective processes implementation techniques. Standard Operating Procedures coupled with training will allow the workers to execute the process in a uniform manner which increases efficiency, and output and lowers cost and wastage of time.