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Workshop 7 Value

Lean Manufacturing Overview Just as mass production (Theme of Workshop 6) recognized as the production system of the 20th century, lean production is viewed as the production system of the 21st century. So first, what is lean production, and what are its benefits?

Value Stream

Perfection

Pull

is

Flow

Lean manufacturing works on the principle of “work smarter, not harder,� as well as working to eliminate production waste; waste being anything that does not add any sort of value to the final product. This includes waiting time, processing, inventory, and leftovers. By eliminating waste, lean manufacturers are usually able to produce higher quality products in a shorter time. The following figure shows that only a very small fraction of the total time and effort are actually spent to add value (from the customer perspective) to the final product. (Micietova, 2011).

Target of Lean Production ->Source: (Micietova, 2011)

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The seven wastes that a lean production system focuses on eliminating are as follows: (Micietova, 2011)  Overproduction and early production : producing over customer requirements, producing unnecessary materials / products  Inventory: holding or purchasing unnecessary raw materials, work in process, and finished goods  Motion: actions of people or equipment that do not add value to the product  Waiting : time delays, idle time (time during which value is not added to the product)  Transportation: multiple handling, delay in materials handling, unnecessary handling.  Over-processing: unnecessary steps or work procedures (non-added value work).  Defective units – production of a part that is scrapped or requires rework. The following table summarizes the differences between Mass Production and Lean Production

Manufacturing Quantity Products

Mass Production Large-sized lots

Lean Production Latest Market demand

Stored in a warehouse

Planning

Not Easy

Type of Process

Push- based

Generally delivered directly to end-users Easy, based on market demand Pull-based

Waste

Huge Volume

Minimal

Machinery

Heavy

Compact and Movable

Table 1: Mass Production vs. Lean Production Mass Production vs. Lean Production

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What is lean production? (All groups) 1. Why Dell uses a lean manufacturing system.

Dell uses a lean manufacturing system to avoid overproduction by building PCs, laptops, and servers on a build-to-order basis. The factory works in a traditional pull scenario; it makes computers only after customers have placed their orders, allowing it to carry fewer inventories. Dell factories are great examples of flow, raw material comes in one side, and finished product comes out the other, with minimal work in progress in between. The lean manufacturing system allows Dell to work both effectively and efficiently (minimize waste) all while enhancing customer satisfaction rate by building the products exactly the way end users want, with the support they need. By adopting a lean manufacturing approach, Dell minimizes, as well, the need for forecasting the demand, which can be really an exhausting task.

2. How their build to order system operates?

The core strategy of a Build-To-Order

approach is to produce each good

based on the likes and requirements of each customer individually. This means for production and supply chain, that there is no action until a customer order comes in and triggers the production process for one specific product assigned to the customer. Supported by the IT revolution in the early 90s, Build-To-Order approach received new attention and companies, which used to plan their production to demand forecasts, started to consider this strategy even for mass produced goods. Dell Inc. triggered the Build-To Order popularity and is considered as the prime example for successful Build-To-Order adoption (Kleinau, 2005). 3


Dell's Build-To-Order manufacturing system is dependent on the integration of information technologies throughout all aspects of the company's operations. Once an order has been made, it is routed to the manufacturing centre closet to the ship-to destination; the order is then electronically transferred from Dell’s order management system to the manufacturing scheduling system where all orders are sequenced into the production schedule every two hours. Every manufacturing centre across the globe has a network of dell servers that act as the brains of the facility. They receive orders from the order entry system. The servers keep track of working process and associate serialized parts with the unique serial number of each machine. Unique software images are stored for download into customer’s machine as they moved through the process. CFI (Custom Factory Integration) allows customers to eliminate software installation upon receipt.

The Build-To-Order process generates request for materials required for customers’ orders every 2 hours. A unique identifier is created and printed into a label in both human readable and machine readable bar code format. The service tag number is used throughout the life of the machine and is the basis for Dell’s quality system. Scanning the service tag indicates to Dell’s workers which components to place into a reusable protective container. The first action after the completed kit arrives in the build area is to scan the service tag, this scan delivers unique instructions based on the customers’ requirements, As Dell team assembles the machine, they can scan the serial number of each part to associate the part’s serial number with the service tag number of that machine. Since the system service tag number is tracked throughout the manufacturing facility, the brains of the facility take over and test the machine to ensure all components are present and operating as expected. After that, the customer requested software is downloaded onto the machine. Final testing finishes the process, and the machine is then transported to the boxing area. This process does definitely ensure a high quality product that meets customers’ expectations (Lean Enterprise Case Study DELL Example YouTube Video).

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3. Why inventories are low?

Low-inventories are the most competitive advantage of Dell compared with other companies. Dell does not have inventories to store products, and even doesn’t store components. In Dell’s business process, everything depends on customers’ orders. Each of Dell’s products has its order from customer before it is made. First, Dell’s customer centre receives orders from customers, and then makes orders to their component suppliers. Each manufacturing factory has same process system with Dell to ensure that they can satisfy Dell’s demands of component as efficient as possible. Second, Dell builds up the components to make the end products and tests them in their own factory, and then sends them to boxing department. Finally, after boxing, Dell’s delivery system will deliver their products to customers directly. That’s the secret of Dell’s low inventories.

The copyright of this picture belongs to iLearn group

3. Why inventories low? The copyrightare of this picture belongs to iLearn group “Please do not copy this without agreement” 

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4. How quality is tracked?

For each product that will be built after a customer makes an order, a unique serial number will be given to the product which contains the information of the order and the customer. During the process of building the product, the system will keep track of the serial number to make sure what components are required and whether its quality is good or not. This translates into fewer defects since the order is being tracked from the first stage of the composition process till the final product is delivered to the customer. Furthermore, the unique serial number can help to identify and receive the feedback from the customer. This well-defined process helps Dell track the quality of its manufactured products, listens to customers’ feedback, and try to improve its quality assurance process based on that.

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5 . Watch the following video which is about inventory management system under the Kanban system. Lean manufacturing is associated with the Kanban or a just in time system. Explain how it is possible to maintain work flow and low inventories. http://www.youtube.com/watch?v=w3Ud7pEhpQM&NR=1

Kanban System is a scheduling system for lean and just-in-time (JIT) production. According to its creator, Taiichi Ohno, kanban is one means through which JIT is achieved. It’s not an inventory control system; it is a scheduling system that helps determine what to produce, when to produce it, and how much to produce. From the video, we could see that Dell’ to-be-made product passes by different work centres at different phases of the building process. For example, work centre A manufactures X with material a and b, and we use X combined with material c and d to make Y and store it in work centre B, and last, in work centre C, we use Y and material e to finally finish building the product and deliver it to customers. So if the products in work centre C are sold out, or there is a low quantity level, a signal will be sent from work centre B claiming that Y part is needed. The same process applies to all work centres. This helps in keeping a low inventory level as different parts of the product are ordered only upon need.

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ďźˆthe picture is from http:// www.xqa.com.ar/visualmanagement/tag/kanban/

Video prepared by iLearn (You can also access to this video via workshop forum)

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6. Watch the following videos and explain how a pull system differs from a push system and what the benefits of a pull system are: http://www.youtube.com/watch?v=neCrb0DUzsY&NR=1 http://www.youtube.com/watch?v=688wwU9F-xc http://www.youtube.com/watch?v=ssUuvUahq48&NR=1

When our friend ordered a Dell’s laptop through the website, he could see the delivery status as “In production”, not “Preparing for delivery” or “Dispatched”. They didn’t have an inventory for his order, but they began to produce the product only when they received the order. Companies, including Dell, that adapt lean production system produce the goods by customer demands. In the Push system, the manufacturer produces as much products as they can manage to make. The product is pushed to the down level of manufacturing or sales whether they need it or not. Therefore, the risk of this system is the excessive inventory which has to be stored, managed, and someday wasted. On the other hand, the process of

pull system

begins with customer’s order.

The customer could be the operators in the next phase of the process, or a normal customer who wants to buy the products. The results of this system are the reduction of excessive efforts such as an over produced products, an inventory management and warehousing. However, the most important characteristic in pull system is customer centric approach. It does not mean that it follows the order from customer, but it constantly challenging the company to design the product to meet changing customer’s needs. The risk of this system is shortage of raw material at the point of purchasing order from customer.

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This picture shows the difference between

systems

push systems and pulls

when customer orders pizza. In the push system, the pizza shop would

make pizza with the prediction of sales. At the end of the production process, the pizza will be placed on warming table. The customer can choose the favourite pizza, and buy it. The risk of this system is the freshness of the pizza. They may not provide the best taste of pizza. On the other hand, in the pull system, the process begins with customer’s order. They can provide the good taste to customer. However, the risk is the lead time of production.

7. Watch the following video to identify the sources of financial benefit from lean manufacturing http://www.youtube.com/watch?v=Fl212lNUzOw

Lean manufacturing has many benefits such as productivity, customer satisfaction, quality, reducing waste, reducing inventory, etc. All of these factors affect the financial aspect of a company. Lean manufacturing helps to reduce the cost. The financial improvement of adopting lean manufacturing is significantly high. The improvement of efficiency enables to produce the same quantity of products with fewer employees. The increase of inventory turns and reduction of inventory contribute to improve the profit. This improvement also allows the company to receive more orders from clients.product and deliver it to customers.

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So if the products in work centre C are sold out, or there is a low quantity level, a signal will be sent from work centre B claiming that Y part is needed. The same process applies to all work centres. This helps in keeping a low


Inventory turns

+200%

Value of on hand

-40%

inventory Total employees

-20%

Revenue per employee

+40K

Purchase order line

+200%

items Invoices

+200%

The financial benefits of lean production from Video clip So if the products in work centre C are sold out, or there is a low quantity level, a signal will be sent from work centre B claiming that Y part is needed. The same process applies to all work centres. This helps in keeping a low inventory level as different parts of the product are ordered only upon need.

1. What is the impact of team working in lean manufacturing?

Lean manufacturing focuses on teamwork or cellular environment. A cellular environment is a work unit larger than an individual machine or workstation but smaller than the usual department. Typically, it has 3-12 people and 5-15 workstations in a compact arrangement. An ideal cell manufactures a narrow range of highly similar products. Such an ideal cell is self-contained with all necessary equipment and resources. Cellular layouts organize departments around a product or a narrow range of similar products. Materials sit in an initial queue when they enter the department.

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Lean Manufacturing at Wiretech (Wiretech 2012) Once processing begins, they move directly from process to process. The result is very fast throughput. Communication is easy since every operator is close to the others. This improves quality and coordination. Proximity and a common mission enhance teamwork. In these environments, employees are more self-driven and require less supervision. One other benefit of cellular environments is information flow within the cells is much quicker and simpler and is often visual which means employees can see the results of their work. This allows employees to catch defects quickly and make decisions to correct problems. Being able to see the results of their work gives employees a sense of accomplishment and job enrichment thus improving morale. Lean also creates a safer work environment by reducing clutter. 12


2. What do you understand by Kaizen?

What do you understand by Kaizen? Kaizen, or the Japanese concept of 'continuous improvement', is a major influence on lean manufacturing. This is why lean manufacturing promotes teamwork among multiskilled, multi-functional individuals at all levels to effect the continuous achievement of process improvements toward zero non-moving inventories, zero downtimes, zero paper, zero defects, and zero delays all throughout the organization. Kaizen was created in Japan following World War II. The word Kaizen means "continuous improvement". It comes from the Japanese words 攚 ("kai") which means "change" or "to correct" and 善 ("zen") which means "good. Kaizen is a system that involves every employee - from upper management to the cleaning crew. Everyone is encouraged to come up with small improvement suggestions on a regular basis. This is not a once a month or once a year activity. It is continuous. Japanese companies, such as Toyota and Canon, a total of 60 to 70 suggestions per employee per year are written down, shared and implemented. Kaizen is based on making little changes on a regular basis: always improving productivity, safety and effectiveness while reducing waste. . It focuses on identifying problems at their source, solving them at their source, and changing standards to ensure the problem stays solved. It's not unusual for Kaizen to result in 25 to 30 suggestions per employee, per year, and to have over 90% of those implemented. Kaizen in Japan is a system of improvement that includes both home and business life. Kaizen even includes social activities. It is a concept that is applied in every aspect of a person's life. Kaizen involves every employee in making change—in most cases small, incremental changes. Kaizen Reduces Waste in areas such as inventory, waiting times, transportation, worker motion, employee skills, over production, excess quality and in processes. Kaizen Improves space utilization, product quality, use of capital, communications, production capacity and employee retention. Kaizen provides immediate results. Instead of focusing 13


on large, capital intensive improvements, Kaizen focuses on creative investments that continually solve large numbers of small problems. Large, capital projects and major changes will still be needed, and Kaizen will also improve the capital projects process, but the real power of Kaizen is in the on-going process of continually making small improvements that improve processes and reduce waste. A Five S program is usually a part of, and the key component of establishing a Visual Workplace and are both a part of Kaizen — a system of continual improvement — which is a component of lean manufacturing.

Five factors of Kaizen  Seiri (tidiness) - the first step in making things cleaned up and

organized  Seiton (orderliness) - organize, identify and arrange everything in a

work area  Seiso (cleanliness) - regular cleaning and maintenance  Seiketsu (standardize) - make it easy to maintain - simplify and

standardize  Shitsuke (discipline) - maintaining what has been accomplished

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3. Why might low inventories make innovation easier?

According to Mr. Robert Krause, lean consultant in Weber Systems Inc., inventory turns are a performance metric for a company’s efficiency, the higher the number, the more efficient a company is. And a company can keep the inventory turn increased by buying less and speeding up more transactions in three functional areas, which are purchasing, AP invoicing, and receiving department. (Krause, 2007). So, why low inventories make innovation easier? For low inventories, representing higher efficiency, which obtained from Lean production leads to advanced process innovation, providing company a chance to save more money and sources for further improvement.

For example, Kodak began to experiment with Lean manufacturing in the late 90’s. While much incremental efficiency had been gained using the Lean tools, it was not until the team applied their new creative thinking skills that they found true breakthrough opportunities. In a half–day’s work, the team produced an annualized savings of US$3,000,000 by coming up with creative ways to reduce unscheduled shutdowns and increase throughput on the machine (The innovative Brain).

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4. What are the key differences between conventional mass production and lean production?

Lean Manufacturing (Lean Production) is also known as a sophisticated production, which said "fine" sophisticated, precise (MABLib). Lean production, derived from Japan's Toyota Motor Corporation's production method, is the most suitable for the production of a modern manufacturing enterprise management while mass production which derived from the United States is no longer suitable for the modern auto production process and market. Lean production has the advantage of combining a large number of production and single piece production with low-cost and high-quality production philosophy.

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LEAN production

MASS production

Efficiency Time

Efficiency increased but requires more time

Performance on efficiency is not good but manufacturing cycle Time is short

Type of production

Push

Pull

Type of layout

Vertical (Job-Shop) type of layout · Horizontal (Flow-Shop) type of layout

Degree of Waste·

considerable surrounding waste· (moving - parking - stockpiling checking - controlling - idling etc.) -

Status of Process · the philosophy of the 2nd Innovation Industrial Revolution

·

LP targets at a waste-free type of operations

represented the philosophy of the 1st Industrial Revolution

·

Lean production is thoroughly pursuing the production of rationality, efficiency and flexibility, adapting to the various needs of production technology and management techniques. Lean production, representing the basic idea of production planning and control as well as inventory management, plays a very important role in the development of modern production.

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5. Especially explain the differences between the role and position of the shop floor workforce in lean and mass production. Shop floor workforce in mass production: ● production was heavily subdivided ● shop floor workers were unskilled and performed repetitive tasks ● shop floor worker took no responsibility for quality ● Shop floor worker could not stop production line to correct faults only senior line manager could do this. In contrast, lean production lay on the shop floor: ● high level of general education of workforce ● team working and quality circles revolving around Deming’s work on quality ● shift of responsibility for quality to the shop floor worker ● building of knowledge and innovation to shop floor level This reflected a fundamental shift in the way in which the shop floor was organised and managed and the behaviour of workforce. 6. Why is team working important in lean production?

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The Power of Teams Lean Manufacturing requires more varied task skills, more flexibility in work assignments and deeper knowledge of processes and quality. More conventional, bureaucratic and functionally oriented organizations do not fit with lean. Failure to change culture and organization is the most common reason that Lean efforts fall short. Trained and mature teams typically make better decisions. They solve problems better. They motivate people for superior performance and they can coordinate tasks better than a collection of individuals. Motivation Motivation is superior with teams, especially Self Directed Work Teams. Think of your feelings while on a winning sports team to appreciate this power. Teams appeal to the higher motivators. They satisfy cravings for social interaction, esteem, and selfactualization. Coordination Excellent coordination is also evident in work teams. This is especially important where multiple, sequential tasks take place. The sports analogy applies here as well. Usability When employees collaborate on projects that affect other employees in the company, you'll see great benefits in the usability and workability of projects. The employees who will actually use the product or process in question will have valuable input for those on the design end of the product or process.

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7. How is lean production related to high responsiveness to customer need?

How is lean production related to high responsiveness to customer need? 1 Lean thinking represented a paradigm shift in the way production and productivity was viewed in both manufacturing and services. 2 Lean involves looking at processes throughout the business not just on the production line. 3 Lean involves reviewing waste in terms of time lost in unnecessary activity that does not add value for the customer. 4 Lean combines flexibility, responsiveness and high quality Lean manufacturing is a high-velocity order-to-delivery process that many manufacturers have successfully used to improve overall business performance. In an environment that employs this process, inventory is “pulled” through each production work centre only when needed to satisfy a customer requirement. This means the entire organization must be configured for maximum flexibility and quick response so custom orders can be filled as quickly as standard orders.

Task 2 Groups 2, 3, 4, 5, 6 This section of the workshop considers what is involved in lean manufacturing and the challenges of introducing it in General Motors. Watch the two video clips and read the article and answer the questions. Toyota and General Motors Toyota and General Motors 2 Wellford W.Wilms et al ‘Cultural Transformation at NUMMI’ Sloan Management Review, Fall 1994 Vol 36, (1) 99-113 (use OneSearch)

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1. What were the origins of the collaboration between GM and Toyota? Why did they form a joint venture?

New United Motor Manufacturing, Inc. (NUMMI) was an automobile manufacturing plant in Fremont, California, opened in 1984. It was created as a joint venture between Toyota Motor Corporation (TMC) and General Motors (GM). Its mission was to produce small cars for sale by both partners. TMC agreed to invest $100 million, supply the cars’ designs, and manage the factory, while GM would provide the building and market half the cars. Each partner was a half-owner of the new company. (Adler 1999)

For Toyota, this was its first major manufacturing investment in the United States. It was great opportunity for Toyota to learn about the peculiarities of the US automotive market. Toyota learned how to adapt its famed Toyota Production System to work with US suppliers, US government regulations, and, most importantly, the UAW (United Auto Workers). After just two years, Toyota invested in its first wholly-owned plant in the USA; this new plant in Kentucky eventually became Toyota's largest outside of Japan.

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General Motors, for its part, also sought to learn from the venture. But its task was more challenging. GM indeed sought to glean tips from Toyota's magic. But the way the joint venture was run kept this learning to a minimum. GM placed a dozen or so managers at the plant; Toyota was in charge of operating the plant and filling other managerial positions. The learning-by-doing of Toyota managers turned out to be the more useful way to learn.

GM Says Goodbye to Toyota Partnership (JALOPNIK 2009)

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2. Outline the difference in production methods in GM (before link up with Toyota) and Toyota. What is meant by just-in-time?

The differences between the two production systems of Toyota and GM are very clear, in fact it can be said that they are the total opposite of each other in terms of their approach to, and methods of, production. One of several aspects of the Toyota production system that differ from The GM system is that Toyota puts a flow into the manufacturing process, while GM has lathes located in the lathe area, milling machines in the milling area. Toyota places a lathe, milling machine and a drilling machine in the actual sequence of the manufacturing process. This means that instead of having one worker per machine, one worker oversees many machines or processes. GM, however, has a group of workers skilled only in lathe operation, a group skilled only in milling. The GM plant layout will have 50 or more lathes in one location. When machining is completed, the items are collected and taken to the subsequent drilling process and after that the milling process. In the US, there is a union for each job function, with many unions in each company. Lathe operators are only allowed to operate lathes and a drilling job must only be taken to a drilling operator. As a result, because the operators are single skilled, a welding job required at the lathe section cannot be done there but must be taken to a welding operator. As a consequence, there are a large number of people and machines and for GM; mass production is the only way to achieve cost reduction under such conditions. When large quantities are produced, the labour cost per car, and depreciation burden are reduced. This requires high performance, high speed machines that are both large and expensive. This type of planned mass production is a system in which each process makes many parts and forwards them to the next process. This method naturally generates an abundance of waste. (Production Systems of Toyota and GM, 2012)

Just in Time or JIT method creates the movement of material into a specific location at the required time, i.e. just before the material is needed in the manufacturing process. The technique works when each operation is closely synchronized with the subsequent ones to make that operation possible. JIT is a method of inventory control that brings material into the production process, warehouse or to the customer just in time to be used, which reduces the need to store excessive levels of material in the warehouse. (Production Systems of Toyota and GM, 2012)

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3 What were the potential barriers to the success of the joint venture?

NUMMI is a very successful joint venture of GM (USA) and Toyota (Japan) to make cars in California. The potential barriers to the success of the joint venture are: Firstly, the lack of understanding and appreciation of the value, secondly, lack of support from top management and team leaders. The lack of understanding and appreciation of the value If Expertise and knowledge associated with new process cannot be fully understood, the joint venture will end up with failure. According to Inkpen (2005), the initial learning challenges are summed up in the following statement from a GM manager:

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Moreover, the language gap might increase the level of misunderstanding of the joint venture value; therefore, the international joint venture should pay more attention to this potential barriers-Communication issue and the issue of the lack of understanding and appreciation of the joint venture value Lack of support from top management and team leaders In Nummi’s case, the support and strong commitment from team leaders play an important role of Nimmi’s success. According to Inkpen (2005), the leader's role is especially important in initiating linkages between parent and alliance strategies. Unfortunately, managers and leaders without commitment and involvement in the alliance management often do not appreciate the deeper meaning of the differences in skills between the alliances, and then the learning opportunity will be discounted.

4 What changes were needed to secure success?

Change in work ethics According to many studies and interview with Nummi employee, they express they were treated with greater respects dignity. Moreover, based on several Japanese principles of increasing productivity and efficiency by avoiding waste of energy, time, and effort, the NUMMI philosophy really encourages a healthy overall morale and friendly environment. 25


Change operation process to sustain high quality and efficiency Firstly, new operation process which consisted of a team of 4 to 6 people and the employee will rotate within a team and get learn a variety of tasks. Secondly, any imperfection correct quickly so that the defected parts don’t pile up. Extra value provided Firstly, the Job classification drop so the range of tasks gets broader, employee can get to learn many tasks so they can solve problem much more efficiently. Secondly, Nummi provide employee highest wage in automobile industry, thirdly, No paid offs. All these extra values were created as a result of Nummi’s positive changes in work ethics and operation process to sustain high quality and efficiency.

5. How were changes in culture achieved?

There were three main elements for transforming organizational culture. The first was a strong enough impetus to induce change. Second, Toyota assumed dominance; its beliefs and management style were more in tune with the market and with employee needs. Lastly, Toyota managers resisted temptation to forge ahead with a pure version of the system. NUMMI has created a new culture the adaptability and flexibility of which would indicate a preparedness to adjust to an uncertain future.

6. What problems occurred and how far were they resolved?

At first, with closure of plants, thousands of workers were out of job in 1982. It was a very difficult time. Then NUMMI reopened the plant, many workers were rehired and changed old styles of labour relation. Workers were organised as 4 to 6 team with a team leader, which efficient improve the productivity and quality. However, during the collaboration process, Toyota was surprised by the American workers with different culture and behaviour. Working in teams help in solving this problem effectively because in a small group, people easily got familiar with each other. Also, in order to increase the productivity, workload were too heavy. While no striking over work standards, no lay-off and highest wage in industry satisfied the workers. 26


CONCLUSION The Times 100 Case Study- Competitive advantage through efficiency, An Aldi Case Study This is the case study, which has been released by The Times, of Aldi supermarket in the UK. (The Times, 2012). This case study explains the adoption of lean principles to service, and focused on the benefits of lean principles to Aldi supermarket. It describes two benefits such as "Time based management" and "Just in Time" which enables Aldi's efficiency to achieve value for money for customers. Aldi have implemented the lean principles to reduce the cost and eliminate the waste. Firstly, they trained their employees to become multi players, so the employees can understand many different roles and work flexibly. Moreover, they pay high salary within the same industry to motivate the employees. Secondly, they pursue efficient process for time-based management and fewer tills and cashiers. These processes are helpful to operate the store with fewer employees. Thirdly, Aldi uses Just in time approach for inventory management, so they can reduce the cost such as warehouse charge, human resource. They also reduce the cost by displaying the goods with packing. However, this case study only insists the advantages of lean principles without considering the other side. It should be considered that the dark side of lean principles in supermarket industry of the aspect of human, because the service is much related with the human than the product is. Firstly, the applied lean principles on Aldi supermarket have increased the satisfaction of customer? In the beginning of this case study, it identifies that Aldi pursues the value for money. It means they aim to satisfy the customer with lower price. They are trying to lower their price by the efficiency such as reducing effort to display goods, fast speed in the till, packaging the goods by customer, fewer variety of goods and small size store. However, these efforts are only focused on decreasing price, but they does not concern about other aspects of customer satisfaction such as tangibility, reliability, responsiveness, assurance and empathy (Parasuraman et al. 1985). Although, the recent report (RetailWeek, 2012) says that Aldi's market share is continually growing, they should think about the customer satisfaction in the respect of sustainability. 27


Aldi's market share (RetailWeek, 2012) Secondly, this case study describes that "Employees are paid market-leading salaries within the grocery industry."; "A comprehensive training programme enables them to become multi-skilled. This means that staff can undertake a number of different roles�. Whatever their salary and turnover rate are in Aldi, they should consider whether it would be helpful to motivate their employees. Rantz, Scott et al. (2007) said that people judge the fairness of pay in relative terms. It means that "they will assess the fairness of their pay by comparing their own ratio of inputs." (ibid.). If Aldi’s employees are not satisfied with their work, their business is not sustainable. Thirdly, what about suppliers? Are they happy? Lean principles are mainly based on small inventory at the place. It means, on the other side, the suppliers are responsible for the inventory to meet the quality, and they should deliver the goods on time. In the case of traffic congestion or fatal accident during the delivery, the risk would be the responsibility of the supplier. Moreover, they also would provide the small amounts of goods in the short interval. It would occur the problem of unfair trading between Aldi and suppliers. From the Aldi case study, it is identified that the lean approach gives a competency to service industry. However, it should be considered that the human aspect of business in adopting the lean principles to make the business sustainable.

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References ● Adler, P. S. (1999). "Teams at NUMMI." Teamwork in the automobile industry: Radical change or passing fashion. ● A. Parasuraman, V.A. Zeithaml, L.L. Berry SERVQUALa multiple-item scale for measuring consumer perceptions of service quality Journal of Retailing, 64 (1) (1985), pp. 38–39 ● Competitive advantage through efficiency 2012, The Times, accessed 20 November 2012, <http://businesscasestudies.co.uk/aldi/competitiveadvantage-through-efficiency/introduction.html#axzz2ClmHajSm> ● In focus: Aldi 2012, graph, RetailWeek, accessed 20 November 2012, <http://www.retail-week.com/knowledge-bank/in-focus-aldi/5034315.article> ● Inkpen, A. C., 2005. Learning Through Alliances:GENERAL MOTORS AND NUMM I<http://webintec.skema.edu/courses/ALLIANCES/document/Readings/Learni ng_Through_Alliances_General_Motors_and_NUMMI.pdf?cidReq=ALLIANC ES> [Accessed 20 Nov. 2012]. ● JALOPNIK 2009, GM Says Goodbye To Toyota Partnership, Ships NUMMI To “Old GM”, accessed 18 November 2012, <http://jalopnik.com/5303761/gm-says-goodbye-to-toyota-partnership-shipsnummi-to-old-gm> ● Kleinau, S. (2005). “The Build-To-Order Transformation” Retrieved from http://www.ti.gatech.edu/docs/Kleinau%20BTO%20Transformation%202005. pdf ● Krause, R., 2007, The Financial Benefits Of Lean Manufacturing, Retrieved from: < http://www.youtube.com/watch?v=w3Ud7pEhpQM&NR=1> [Accessed 18 Nov. 2012] ● Martin Kenney and Richard Florida: Beyond Mass Production: The Japanese System and its transfer the United States (New York, 1993) p. 16 ● Micietova, M. (2011). “Lean Production, Lean vs. Mass Production, TPM As a Tool of Lean Production” , Retrieved from http://pernerscontacts.upce.cz/24_2011/Micietova.pdf ● "Production Systems of Toyota and GM." 123HelpMe.com. 20 Nov 2012 ● <http://www.123HelpMe.com/view.asp?id=165910>. ● Rantz, M. J., J. Scott, et al. (2007). Employee Motivation: New Perspectives of the Age‐Old Challenge of Work Motivation. Nursing Forum, Wiley Online Library. ● The innovative Brain, The Need for Innovation and Lean: Managing the Paradox Between Newness and Quality. Retrieved from: < http://www.newandimproved.com/newsletter/> [Accessed 18 Nov. 2012]. ● Wiretech 2012, Lean manufactureing at Wiretech, digital image, accessed 20 November 2012, <http://www.wiretechfab.com/html/lean_process.php> 29


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Innovation _WorkShop 7 from i Learn  

Lean Manufacturing Overview Just as mass production (Theme of Workshop 6) is recognized as the production system of the 20th century, lean...

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