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March 13, 2012

Uncovering the Hidden Factory through SMED

By Rodney Reddic March 13, 2012
Stopwatch

Is time on your side?

Too often, companies are quick to implement new equipment in order to meet increased customer demand for products, without maximizing the utilization of their current equipment.  Equipment changeover time is one area of the business that is often ignored and companies accept long changeover as a part of doing business.  The changeover time of equipment can be a Hidden Factory just waiting to be uncovered.  It is very common for equipment changeover from one product to the next product, to take a couple hours for completion.  Companies often make several product changeovers per week, consuming hours of potential production time.  If we could somehow reduce the changeover time from hours to minutes, we could have a dramatic effect on providing additional production capacity.  This is what Dr. Shigeo Shingo discovered while helping to develop the Toyota Production System.  Dr. Shingo terms his discovery SMED (Single Minute Exchange of Dies), and it prescribe that changeover time should be less than ten minutes for a given product.

What does SMED Involve?

Companies can systematically reduce changeover time on their equipment by following a simply four step method.

  1. Document the current changeover process and break the process into elemental steps.  This is typically done through the shooting of a changeover video of the process and reviewing the video to document the steps and times associated with each step.  The steps are also classified as internal (Step occurs while the equipment is not running) or external (Step occurs while the equipment is running and producing product).
  2. Review each process step: Is it necessary or can it be eliminated.  During the review, ideas are generated on how to convert internal steps to external steps.  Internal steps in the changeover process are the driving factor for the overall changeover time on the equipment.   Thus, reducing the internal steps has a dramatic effect on the overall changeover time for the equipment.
  3. Re-examine the remaining internal steps with the goal of (Streamlining, Combining or Eliminating) the steps.   Often steps can be performed in parallel with the addition of Assist Operator during the equipment changeover.  Working as a team and performing parallel operations can have a dramatic effect on reducing the time on the equipment changeover.
  4. Focus on eliminating adjustments for the remaining internal setup steps.  In this step, the reliance on “Tribal Knowledge” is significantly reduced or eliminated through the development of hard settings for the equipment.  Often the equipment is updated with scales, gauges, and visual controls that can be used to establish initial settings for running a particular product on the equipment.  By establishing initial settings based on past production runs, the trial and error time at start-up can be significantly reduce and the equipment can produce good product much faster.

SMED Four Step Process
Finally, after completing the SMED four-step process a new changeover standard can be developed using the remaining internal and external steps.   The new changeover standard should prescribe the changeover sequence and operators required to complete the changeover on the equipment.

For most companies that have not participated in any formal changeover reduction process on their equipment, applying the SMED approach typically reduces the changeover time by 50% when first applied.  By continuing to work as a team, planning changeovers, practicing, being innovative and standardizing changeover methods equipment changeover times can continue to be reduced.   Companies should strive to achieve the goal of single-minute changeover times and recapture the loss capacity due to long changeover times.

  • Planning
  • Practice
  • Innovation
  • Standardization
  • Continuous Improvement

March 8, 2012

EHS: Profit Center or Circumstantial Overhead?

By christophermeeks March 8, 2012

Historically, most companies have viewed their EHS department as a necessary evil that must be retained to avoid regulatory infractions.  However, some companies have shifted their thinking to include their EHS departments as profit centers through re-classifying wastes as revenue streams and identifying opportunities for cost reductions and cost avoidance.  This transition is becoming more noticeable as companies implement ISO programs, look for ‘Greener’ products and attempt to reduce the use of raw materials.  The following include techniques to demonstrate to executive managers that an EHS department can serve as more than just an overhead expense:

  • Lighting Upgrades – improve the quality of lighting in work areas, reduce cost, reduce certain pollutants emitted when generating electricity
  • Finding Markets for ‘Wastes’ – re-classify ‘wastes’ as feedstock in another company’s process to eliminate disposal costs, receive revenue, reduce regulatory requirements
  • Searching for Product Alternatives – compare ‘real’ price of existing materials versus ‘real’ price of using less hazardous materials
  • Deploy ‘Source Reduction’ – evaluate processes to implement procedures that significantly reduce or completely eliminate waste before it is created

And, as always, DOCUMENT, DOCUMENT, DOCUMENT.  Without an accurate baseline, results are hard to demonstrate.

December 6, 2011

But we have to…

By raikman December 6, 2011

Some Lean practitioners have promoted the use of a third type of value-add: Non-Value-Add Required (NVAR).

Value-Add Ratio

Also known as Business Non-value Add, these activities are those that must be performed for legal or regulatory requirements.  Another consideration is whether the process would fail altogether if the process step were eliminated.  It is important to keep in mind that these activities are still a form of Non-Value Add.  So the goal from a Lean practitioner standpoint for NVAR activities is to minimize or (if possible) to eliminate these process steps.

A Fundamental Lean Measure: Process Cycle Efficiency

Once you have agreed on the definition of CVA a key measure to understand for any Lean practitioner is the Process Cycle Efficiency (PCE – also called value-add ratio).  This is simply the ratio of the total customer value add time for a single item (or transaction) divided by the total process lead time to deliver the product (or service).  This is the key performance measure of any process.

A number of Lean writers estimate that a typical process has a PCE of 5% or less.  In other words, 95% of the time required to move a product (or information) from start to finish are due to non-value add activities.  Common examples of such activities include waiting, performing rework, reviewing information, dealing with defects / errors / mistakes, moving items, and watching.

Past research for a variety of types of business processes resulted in the following figures for a typical PCE, and ‘world class’ PCE (George Group, 2004):

Type of Process Typical PCE World Class PCE
Machining 1% 20%
Fabrication 10% 25%
Assembly

(Batch Transfer)

15% 35%
Continuous Process/ Assembly

(Continuous /One Piece Flow)

30% 80%
Business Processes

(Transactional)

10% 50%
Business Processes

(Creative/Cognitive)

5% 25%

My own experience is that the values in the table above for ‘typical’ processes are somewhat generous.  That is, the values are too high.  I have seen PCE values well below 1% for many processes.  In short, while the practice of determining the PCE for any process is an important one, it can also be very humbling.

The Challenge of Defining Value

As noted previously, both new and experienced Lean practitioners sometimes struggle with defining value.  I hope the guidelines covered in Parts 1 and 2 of this blog will help to make this task a little easier.  But even if you still find it challenging, I would suggest that the time spent discussing, debating, and arguing over how to categorize each process step in terms of CVA is exactly the sort of thing you should be doing as a lean practitioner.  Working through this categorization is fundamental to developing Lean thinking, and hence is always worth the extra time required.

Finally, from a Lean practitioner standpoint you should always keep in mind the following rule of thumb when working on various types of activities:

  • Customer Value-Add : Optimize
  • Non-Value-Add Required: Minimize
  • Non-Value Add : Eliminate

December 1, 2011

Defining value, part deaux

By raikman December 1, 2011

In part 1 of this topic the fundamental concept of customer value was discussed.  Before applying lean methods to improve a process, the first step is to define exactly what value means for that process.  Or more accurately, to define what value means for the customers of that process.

Does your process contain too many non-value added activities?

What's the value?

This understanding of what adds value – which comes from an understanding of customer requirements – can then be used to categorize each process step as either Customer Value-Add (CVA) or Non-Value-Add (NVA).  Once this categorization is performed a lean practitioner can focus on eliminating or minimizing non-value-add activities.  Sounds simple, and for many lean projects it can be that straightforward.

As was explained in Part 1 of Defining Value, there are two key characteristics of process steps that add customer value:

1)      Change to materials OR information

2)      Something for which a customer will pay

So to be clear: A customer value-add process step must cause both a change to materials (OR information) AND be something for which customers will pay.  Examples of such activities in manufacturing include cutting metal, assembling a wiring harness, and painting a panel.  In a transactional process CVA activities include analyzing data, writing a report, approving a loan, performing a credit check, and answering customer questions.

The Second Time Around

Not covered in Part 1 was the situation where any of these activities are done a second time due to a mistake made the first time.  In this case the process step should not be categorized as customer value-add.  Such an activity is a form of rework, and although it may meet the first part of the definition of customer value-add (a change to materials or information) it fails the second part (activities for which a customer will pay).  Think about it:  If you purchase a new television, would you want to pay for rework performed on that TV?  Or if you submit an application to refinance your home loan do you want to pay for mistakes made by the staff of the bank?

One easy way to check if an activity is non-value-add is to see if the letters “re” are used in describing the task.  Some NVA examples include: rework, review, rewrite, repaint, retest, recheck, return, recall, retype, retrain, reissue, reship, redesign.  Always keep in mind the lean goal to ‘do it right the first time’.

Assessing Value in Internal Processes

This approach to classifying activities as CVA or NVA seems pretty straightforward for most manufacturing processes, and even most service processes.  Where many lean practitioners struggle is when they are working to improve internal processes that may not directly impact the external customer.  Examples of such processes include payroll, month-end close, hiring/HR, and regulatory processes.  Clearly such processes do result in a change to materials or information.  But just as clearly, external customers are not willing to pay for these types of activities.

There are two keys to assessing value in such processes.  The first is the previously mentioned question of who is the customer of the process.  But the second consideration is to answer the question: Are we looking at the process level, or at the organization level?  The answers to these questions will help in characterizing the process steps.

To be clear, when speaking of organization level I am referring to the value stream used to meet the needs of the external customer by the organization.  This value stream – sometimes referred to as the order fulfillment process – is really made up of a series of sub-processes including order entry, scheduling, operations, packaging, and delivery.  The customer at the organization level is the customer who pays for the product or service they receive.

On the other hand, the process level refers to any process within an organization whether it is part of the order fulfillment process (such as operations) or is a support process (such as payroll or hiring).  The customer of the hiring process is the department that needs a new employee.  The customer of the month-end-close process is the management team.

Now let’s look more closely at a process like payroll.  Does the external customer – i.e., the paying customer – care about payroll of their supplier?  No, they do not.  So at the organizational level, the payroll process does not contain any CVA activities.

But now consider the customers of the payroll process: employees (who want to be paid), managers (who need to track costs), and the government (who need the information to tax the company and its employees).  Each of these entities do value the activities required to provide them with the various products (checks, reports, information) of the payroll process.  So at the process level, there are CVA activities.

And here is the clincher: What if the company decided to outsource payroll?  That is, what if they asked a third party to perform the process of payroll.  Would the company pay the third party to perform this process?  Absolutely.  Therefore, one can infer that the company values the critical activities performed in the payroll process.  So now we have met the two requirements of a CVA activity covered in Part 1: (a) Change to material OR information, and (b) Something for which a customer will pay.

Do you have non-value add elements in your processes? What are you doing to make your processes more efficient?

November 3, 2011

What is Value?

By raikman November 3, 2011

Does that activity add value?  The answer can provoke friendly debates, heated arguments, tears, hurt feelings, and the occasional fist fight.  And that’s just among lean project team members!  It can be even worse between lean practitioners and front-line workers, whether they are in a factory, warehouse, retail store, or office. 

Think about it from this perspective:  How would you feel if someone told you ‘What you do all day long is not a value-add activity’?  That is the reason it is important to make a"Value Added" distinction between the person performing an activity, and the activity itself

Yet despite the difficulty of defining value, it is a key skill for any successful lean practitioner.  In the book Lean Thinking by Womack & Jones (1996) they proposed a basic approach to implementing lean that consisted of a five step process.  The authors stated that “Specifying value accurately is the critical first step in defining lean thinking”. 

In other words, before you can move forward in applying various lean concepts it is important to begin with a clear understanding of what constitutes a value-add – and non-value-add – activity.  In the book mentioned above the authors address this topic further by noting that:

“Value can only be defined by the ultimate customer.   And it’s only meaningful when expressed in terms of a specific product (a good or a service, and often both at once) which meets a customer’s needs at a specific price at a specific time.”

Several years ago I investigated the topic of value in order to make a presentation at an engineering conference.  What I discovered was that different writers had different explanations of value-add.  Consider these definitions from that research:

Value is added by changing the form of something or by moving it closer to the customer

 Activities that must be performed to meet customer requirements

Value-added time may be thought of as any time spent on actually transforming the product toward its final configuration.

Value-added steps (or activities) are those that matter to the customer (external or internal); all others are nonvalue added.   If there is disagreement over whether a step is value or nonvalue-added, it is best to err on the side of calling it value-added.

  •   Patrick Shannon “The Value-Added Ratio”  Quality Progress, [March 1997]

Any activity that increases the market form or function of the product or service.  (These are things the customer is willing to pay for.)

  •   MEP Principles of Lean Manufacturing  [1999]

The overarching themes seen in these definitions are two-fold:

1)      Change to materials OR information

2)      Something for which a customer will pay

In other words, if an activity results in a change to materials OR information AND if a customer would be willing to pay for that activity, then said activity should be classified as value-add.  Examples in the world of manufacturing include tasks such as cutting, welding, assembling, and painting.  In terms of service processes, examples include checking in a person at a hotel, answering technical questions via a helpdesk, mowing a lawn, and assisting a customer with the use of a new product. In the world of transactional processes, examples of value-add activities include capturing customer requirements, analyzing data, writing reports, making key decisions, and communicating needed information. 

Of course, there are always some activities that fall into a ‘grey zone’ in terms of value-add.  In the manufacturing arena two examples are tooling costs and setup charges.  Many firms routinely charge fees associated with activities associated with these two process steps.  Yet neither of them result in a physical change to materials. 

Another such example is inspection.  In some industries a supplier is required by contract to inspect their product before sending it to the customer.  So in essence the customer is willing to pay for this activity.  Yet inspection does not result in a physical change to a product.  In office processes inspection or review activities are very common.  Such steps are often put in place due to some problem that may have occurred months or years ago.

So should these tasks that fall into the ‘grey zone’ be classified as value-add activities?  From a lean purist standpoint, I would say no.  But from a practical standpoint I would be willing to accept that they are value-add.  At the end of the day, it is more important that you agree on a definition of value-add at your firm, and are consistent in how it is used.

In Part 2 of Defining Value we will explain a fundamental lean measure to use when examining the level of value-add in a process: Process Cycle Efficiency.  Also covered is an explanation of this measure in terms of both typical and world-class firms for various types of business processes.  Finally, Part 2 will include a discussion of how to categorize activities performed due to regulatory and similar requirements.

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