Have you ever wondered how to produce your product or service more efficiently?
Paul Akers is obsessed with continuous improvement, but he has a great time running FastCap using lean manufacturing principles. He took the time to sit down and explain how an idea to make cabinets look better turned into a company making over $36.5 million per year.
It’s a pretty awesome story! We’ll share his insights with you starting by explaining lean. We’ll also discuss how to come up with your first idea, principles of lean manufacturing, and examples of how to eliminate waste in business.
Keep reading to improve your business practices.
What is Lean Manufacturing?
Lean manufacturing focuses on two main principles:
Eliminating Waste or “Muda” in Japanese
Lean principles have their roots in the Toyota production system dating back to 1930. Japan lacked the space and resources to build the massive factories you would find in other countries. This led Toyota to develop just-in-time manufacturing.
Paul Akers was familiar with the lean manufacturing process from seeing a friend’s cabinet shop where they didn’t have cabinets made until they had an order. He didn’t really fully appreciate it until he had an experience where he couldn’t solve a problem at Fast Cap.
Paul told us:
The bank came to see the shop, and told me, ‘If you need a loan, just let us know—we’ll loan you however much you need.
But a Japanese lean manufacturing expert told us ‘You’re clueless!
He was able to reduce a process from 45 minutes down to 5 minutes in about a week, and it really improved the cycle time. After that, I jumped on a plane to Japan to learn what they were doing. Hear the full story here:
What is different about the Toyota Production System?
The Toyota Production System is described by Toyota as:
A production system based on the philosophy of achieving the complete elimination of all waste in pursuit of the most efficient methods.
It has two main approaches to improving a product or service – Just-in-time manufacturing and “jidoka” (loosely translated as automation with a human touch).
Keep reading to find out more.
Toyota applies just-in-time manufacturing by following several basic practices:
Do not build until needed.
Once an order is received, send production instructions to the assembly line as quickly as possible.
The assembly line should be stocked with the exact number of parts to build any vehicle.
Upon use of the parts, the assembly line should immediately replace them to be prepared for the next order.
The company should keep a minimal amount of parts on hand to meet production.
Jidoka is a term coined by Toyota that focuses on automating the production process until a defect is detected. As soon as a defect is detected, production stops to eliminate waste. Once the process has been corrected, the manufacturing process is restarted.
What Are the Types of Waste in Lean Manufacturing?
Lean thinking focuses on the elimination of waste. So let’s look at what a lean enterprise would consider waste. There are 7 types of waste, but many lean systems also consider an 8th type of waste. The types of waste are:
Unnecessary movement of people, equipment, or machinery
Waiting – either people or idle equipment
Over-production of a product
Over-processing or adding unnecessary features to a product
Defects-part, product, or service doesn’t work properly causing increased costs.
Bonus: Wasted talent
If you can’t already tell, most of these should save you money and hopefully increase your profit, but Paul thinks it is important to emphasize:
Make it about profit and lose. The real benefits an organization will see when they eliminate waste are happier customers and employees. You’ll also be putting out fewer fires because your organization runs more smoothly.
Let’s look at each and find out some ways that Paul Aker’s team improved them.
Unnecessary transportation is focused on moving something from one place to another. This is typically in regards to the supply chain.
One of the industries that are notoriously bad about eliminating waste in this area is the airline industry. If you’ve ever taken a plane from Dallas to Los Angeles to get to Vegas, that’s a waste of time and gas as you practically have to fly over Vegas on the way to LA.
Find the most effective, least costly solution to go from raw materials to the customer without negatively impacting value. If your supply chain has multiple stops before it gets to you, try to make each step in the production process bring the inputs closer to your location.
Reduce Excess Inventory
Excess inventory is wasteful because it requires more space to store inventory. The inventory referred to here is unprocessed inputs such as wood for a cabinet. Basically, you are only buying the raw materials you need to complete the jobs on hand.
Eliminate Unnecessary Movement
Every movement that is performed should add value to the customer. If it doesn’t, it’s muda. Paul tells us about several processes Fast Cap has implemented to reduce unnecessary movement, but one that really stood out to me was the use of different color lights.
Our forklifts are really big, and they could really hurt someone if they walk into one of the blindspots. We put a red light at the end of each aisle that turns on when the forklift is in that aisle. That helps people know not to go down it.
Eliminate Wasted Time
Wasted time is one of the key ways to cut waste. As humans with finite life spans, time is one of our most valuable resources. A company cannot achieve the highest levels of success without respecting its resources.
Businesses measure wasted time using productivity metrics like Revenue Per Employee. At this point in time, automation is far less than the cost of an employee over 50 years, so businesses should be adopting automation to try to reach the point where employees’ primary focus is adding value.
Paul gave us an example of wasted time on a project creating custom parts for a customer. It was taking them 3 days to create the parts because the process required a lot of human activity.
The process involved a handle that had to be pulled down multiple times per product and a duster to clean the parts as the final step.
He told us:
By adding a foot pedal that connects to the handle via a bungee cord, we were able to pull the pedal with our feet. Then we were able to find a great place for the duster where we dusted the part as we moved it to the container for shipping. These two changes cut the time to 8 hours.
This type of waste simply refers to producing more of a product than is needed at the current time. If you need 26,000 Fast Caps to complete the orders for the day, you only want to produce 26,000. Any more than that is waste because it will impact your storage needs.
This production process can create tremendous results in terms of productivity and cost savings, but you’ll need ways to make sure that orders don’t slip through the cracks during the process.
Fast Cap uses clipboards for expedited shipping orders. They only take the clipboard once they are ready to produce it. When they are starting to close for the day, they can easily make sure they completed the expedited orders by checking to see if any are missing.
A customer expects a product to serve a specific purpose, and how well it serves its purpose impacts how well the customer will value the product. You want to do the least production necessary to create value for the customer. Anything more than necessary is waste.
There are two key ways companies overprocess, including unnecessary steps to accomplish the goal of adding unnecessary features. We’ll be talking about reducing steps in much more detail later, but let’s look at lean manufacturing examples to prevent unnecessary features.
Let’s assume Fast Cap gets an order for caps for screws that go in oak cabinets. Providing a variety pack of different color caps would be an example of a wasteful feature. The majority of the caps wouldn’t be used while building the cabinets.
Respond when Defects Occur
Defects are anything that reduces the quality of the product. Today, recognizing defects will primarily be done with automation. If a camera detects a scratch on a Fast Cap, the cap should be separated before it is put in with the other caps.
If the defect could impact safety, the process should be stopped, and someone should conduct a root cause analysis of the situation. Once the cause is identified and corrected, the production cycle can continue.
Bonus: Don’t Waste Talent
In many companies, management thinks they know best, but a lean enterprise realizes that their people know their jobs best. They perform them every day and know where there is room for improvement. Innovation occurs when you empower that talent.
Paul told us that the best tool he found to eliminate waste is 3 S-ing. It stands for “sweep, sort, and standardize.”
Every day when we come in, we start our day by sweeping. This helps us spot things that are out of place and correct them. Each of us spends about 30 minutes doing this. The focus is on eliminating waste and solving problems.
This method empowers everyone to find areas for improvement in Fast Cap’s production process. Once someone finds a way to reduce waste in the business, they make it where the processes are easily repeatable by anyone in the company.
Lean techniques make it where everyone owns the continuous improvement cycle, making the business a place everyone enjoys being at.
What are the 5 Lean Manufacturing Principles?
The lean manufacturing principles go beyond the Toyota Way to help organizations that provide a product or service. The principles require a true system-wide focus on continuous improvement, but what are the 5 principles of lean manufacturing?
Identify the Value Stream
Create the Flow through the Value Stream
Establish a Pull System
Continuously Improve the System
Let’s look at each of these.
The first step to implementing lean thinking is to define value as it applies to your organization. In lean manufacturing, value is typically focused on what adds value to the customer, but different parts of a business have different customers. There are three main types of customers that an organization will have:
Customers who buy a product or service.
Regulators who require proof of compliance.
Stakeholders who want proof that the improvement adds value as measured in profit.
Each of these customers will define value differently.
Customers pay for a product or service based on their needs and desires. Anything that does not meet their needs is considered waste. It should be eliminated. They care about the product and customer service. Anything else is meaningless to them.
Like Paul said,
When you go a coffee shop, any steps before you brew the coffee and pour it are waste. They aren’t paying you to wash the coffee pot. They are paying for you to make them a pot of coffee.
Regulators are concerned with companies following the rules. The rules are there to protect employees, customers, or investors. Failing to abide by them can result in huge fines, lawsuits, and even halting company operations.
The cost of compliance in manufacturing is twice as high as most industries according to the National Association of Manufacturers. Unfortunately, this cost isn’t really part of the value stream as defined by the customer.
The value here is derived from several hidden costs:
Cost of workplace injuries and deaths-According to the National Safety Council, workplace injuries cost $171 billion in 2019.
Cost of product recalls – 4,217 product recalls in the U.S in 2015. According to Smart Sense, food recalls can cost $10m/recall. Meanwhile, the Volkswagen recall cost $30 Billion.
Cost of fines: OSHA can fine a company up to $136,532 per day, per violation.
Spending to avoid these costs through training, documentation, and preventive measures aren’t necessarily important to the customer, but they can definitely impact customers through increased costs or loss of service due to company closure.