Lean Mesurement Book

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L E A N

E N T E R P R I S E

Participant WorkbookL E 2 0 8

Performance Measurementfor the Lean Enterprise

v1.0


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L E A N

E N T E R P R I S E



v1.0

This copyrighted course was developed by BMA Inc. in collaboration with

NIST/MEP and is the preferred Performance Measurement training for all

360vu clients and is offered exclusively through certified 360vu providers.

360vu is a registered service mark carried by certified providers of 360vu

services.

To contact a certified provider of 360vu services, dial 866.GO.360vu or visitour website at 360vu.com.


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How this workshop fits into the big picture.

This workshop is one piece of an integrated suite of 360vu toolsand services created exclusively for small manufacturers by360vu.

The concepts and practices taught in this 360vu workshop arepowerful and proven. They've helped companies like yourssignificantly improve their operations from shop floor to frontoffice.

However, 360vu is more than the ideas presented in thisworkshop. It is a strategic approach to business that helps smalland mid-sized manufacturers really start looking at their wholecompany-where they want to be and how they can get there.

At the core of 360vu is the professional business advisor. Thismanufacturing and business expert will guide you through aseries of steps, the 360vu Business Approach, developed tohelp you systematically tackle the right projects, in the rightorder, at the right time.

All 360vu resources-people, tools and workshops like this one-are pulled into this process as needed to help you focus onimproving and integrating the systems that drive your business,all within the context of where you want to go.

iii


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Contents

Welcome and Introductions.... page 3

The Purpose of Performance Measurement page 5

Performance Measurement and Lean Manufacturing page 7

The Starter Set... page 31Corporate/Strategic page 36Value Stream.. page 46Cell Measures. page 65

Developing Performance Linkages page 84

Implementation.. page 103

Summary and Evaluation. page 124

v


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L E A N

E N T E R P R I S E



v1.0


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LE208 v1.0 Performance Measurement 360vusm

1

L E A N

E N T E R P R I S E

Performance Measurement for theLean Enterprise


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LE208 v1.0 Performance Measurement360vusm

2

360vuSMLE208 v1.0 Performance Measurement 2

Not everything that can be countedcounts, and not everything thatcounts can be counted

Albert Einstein


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3


Course Agenda

Welcome and Introductions

The Purpose of Performance MeasurementPerformance Measurement and Lean Manufacturing

The Starter Set

Corporate / Strategic

Value Stream

Cell Measures

Developing Performance Linkages

Implementation

Summary and Evaluation


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4


What You Should Be Able To DoAfter This Class Understand and explain how traditional performance

measurements conflict with lean performance

Understand barriers to adopting performance measurements andhow to begin to overcome them.

Understand and implement the starter setof performancemeasurements at the Corporate level, the Value Stream level, andin Production Cell to motivate lean behaviors.

Develop a clear linkage from your companys business strategy to

performance measurements used in the value stream and inproduction cells.


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5


Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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6


Why Are the Right PerformanceMeasurements Important?

What you measure is what you get.

Measurements drive peoples behavior. People need rapid and relevant feedback.

Measurements indicate progress towards planned goals.

When you can measure what you are speaking about, and express it innumbers, you know something about it. But when you can not measure it,when you can not express it in numbers, your knowledge is of a meagerand unsatisfactory kind...

Lord Kelvin (1824-1907)


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7


Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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8


Defining Lean

A systematic approach to identifying and eliminating waste (non-

value-added activities) through continuous improvement by

flowing the product at the pull of the customer in pursuit of

perfection.

The MEP Lean Network

Lean is:


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9


Definition Of Value-Added

Value-Added

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

Non-Value-Added

Any activity that does not add market form or function or is notnecessary. (These activities should be eliminated, simplified,

reduced, or integrated.)


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Lean = Eliminating Waste

Non-Value-Added

Defects Overproduction Waiting Not Utilizing Employees knowledge,

skills and abilities

Transportation Inventory Motion Excess Processing

Typically 95% of all lead time is non-value-added.

Value-Added


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11


Lean Building Blocks

ValueStreamMapping

Continuous Improvement

Performance Measurement

Performance Management

Quick Changeover

Standardized Work Batch Reduction Teams

Quality at Source

5S System Visual Plant Layout

POUS

Cellular/FlowPull/Kanban TPM


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Shadows of the Neanderthal

Read or listen to the story Shadows of theNeanderthal:

- What are the main points of the story?

- What are examples of the two towerproblem fromcurrent events, or from family life?


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Two Views of the Same Reality

Your world view depends upon where you are looking from your perception.

Two groups can have a quite different perception of the samesituation according to their viewpoints and their assumptions.

These perceptions can become deeply held beliefs.

Our beliefs constitute mental models about how the worldworks.

People work to preserve their mental models even when theyacknowledge their inadequacy.

These mental models often lead to conflict between twogroups even when they have similar ultimate objectives.


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Lean Represents a New Mental Model forPerformance Measurement

SHIFT

Traditional Lean

Focus onLowestProduct

Cost

Focus onMaximizing

Value StreamProfitability

The Dimensions and Implications of this Shift are Presentedin the Following Slides


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Compare the Differences

ASSUMPTION: Profit comes from full utilization of resources

Traditional Measurements

MEASUREMENT: Labor efficiency & machine utilization

BEHAVIOR: Make more product

WHAT IS IMPORTANT: Full utilization of resources


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Compare the Differences

ASSUMPTION: Profit comes from maximizing flow based oncustomer pull.

Lean Thinking

MEASUREMENT: Throughput

BEHAVIOR: Eliminate barriers to flow

WHAT IS IMPORTANT: Flow according to customer pull


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Comparing Assumptions

Profit comes from fullutilization of resources

Direct labor is the mostimportant conversion cost

Control the business thrudetailed tracking

All excess capacity is bad

Traditional Assumptions

Profit comes from maximizingflow on pull from customers.

Waste = resources impeding theflow

Control thru continuous attentionto flow & waste

Excess capacity providesflexibility

Lean Assumptions


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Increased Sales Revenue

Value to the customer

Value streams

Flow & pull from the customers

Team structure and individualempowerment, accountability

System quality

Pursuit of perfection

Full utilization of resources

Cost per Part

Overhead absorption

Batch and Queue

Inventory valuation

Departmental structure andindividual efficiency

Product quality Pursuit of budget

Comparing What Is Important

Traditional Thinking Lean Thinking


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Labor efficiency &machine utilization

Cost variances vs.standard

Budget adherence

Direct labor as % ofsales

Cycle time

Throughput

First time quality

Inventory Turns

Delivery to customer

Value stream focus

Comparing Measurements

Traditional Measurements Lean Measurements


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Make more product

Utilize resources to themax

Optimize dept.efficiencies

Track direct labor indetail

Allocate other costs

Eliminate barriers to flow

Focus on value streamsrather than departments

Continuous improvementand team-work

Eliminate waste,inventory, and over-production

Comparing Behaviors

Traditional Behaviors Lean Behaviors


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Dynamics of Lean Implementation

Improvement Results:

Short cycle times

Lower inventories

Higher quality

On-time delivery

Less machine downtime

Simpler planning &scheduling

ImprovedResults

ImprovementEfforts

Commitment

to Lean


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Dynamics of Standard Cost Accounting

Unfavorable Variances:

Volume variances

Labor utilizationvariances

Machine utilizationvariances

Overhead absorptionvariances

ExcessCapacity

Less PartsProduced

Less DirectLabor Hours

UnfavorableVariances

Pressure toProduce

More Parts

LeanImprovement

Results


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The Two Views Work Against Each Other

Excess

Capacity

Less PartsProduced

Less DirectLabor Hours

UnfavorableVariances

Pressure toProduce

More Parts

ImprovedResults

ImprovementEfforts

Commitmentto Lean

Initially.

Overheadburdens per unitgo up

Variances gounfavorable


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Lean Has Produced Very PositiveResults

Lead times reduced from 20 days to 5 days

Inventory turns increased from 10 turns to 50

Cash flow has doubled

On-time delivery increased from 80% to 99%

These Results Should Lead to ImprovedProfitability


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But The Costing System Has MaskedThe Profit Improvement

Significant inventory reduction has a short-termnegative impact on profitability.

Acme Stamping Income StatementCurrent State

before Lean

Lean Future

State

Lean

Improvement

Revenue 216,200$ 216,200$ -$

Production Costs 121,043$ 119,000$ (2,043)$

Material Costs 71,944$ 71,944$ -$

One-Time Inventory

Reduction -$ 12,243$

Overhead Cost 20,000$ 20,000$ -$

Total Cost 212,987$ 223,187$ 10,200$

Gross Profit 3,213$ (6,987)$ (10,200)$

12,243


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Discussion

How do you propose to reconcile theseconflicting views?

What are some fundamental things that mustchange?


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The Solution

Develop a set of measurements throughout the organization

that thoroughly reflect the companys lean strategies andgoals.

Replace the traditional measurements with lean performancemeasurements that are designed to motivate and monitor leanbehavior.

Engage people to work to improve measurement results, sothat they will be actively contributing to company goals.


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The Measures Must AchieveEffective Control

SYSTEMGap

Input Output

MeasureGap between

Actual andexpected

Control Process

Cause/effectRapid feedback

SystemChanges

Goal


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They Must Measure Causal andPredictive Factors

Historical Predictive

Causal

Derived Traditional

Lean


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Effective Performance MeasurementMakes a Difference

Measure of SuccessPerformance Measurements

Agreement on Strategy 90% 47%

Communication of Strategy 60% 8%

Cooperation and teamwork 85% 38%

Adapted from: Ingle & Scheiman Is Measurement Worth It Management Review,Morgan & Scheiman, Measuring People & Performance Quality Progress

Measure of SuccessOrganization with Good

Performance Measurements

Organizations with Poor

Performance Measurements

Industry Leader over the Last 3Years

74% 44%

Three Year Return-on-Investment 60% 45%

Success in the last major changeeffort

97% 55%

Organizations with LeanPerformance Measurements

Organizations with TraditionalPerformance Measurements

Organizations with LeanPerformance Measurements

Organizations with TraditionalPerformance Measurements


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Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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Strategic Goals and Key PerformanceIndicators

Grow Sales

Grow Earnings

Improve Cash Flow

Improve Customer Value

Improve Employee Satisfaction Employee Turnover

On-Time Delivery

Customer Satisfaction

Inventory Turns

EBITDA

Sales per Employee

Sales Growth


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The Starter SetPrimary Measures

Days of Inventory/WIP to SWIP

Overall EquipmentEffectiveness

First Pass Yield

Dock to dock/Order toDock

A/R Days Outstanding

Average Cost per UnitShipped

First pass Yield

Day-by-the-Hour Units per Person

On-Time Delivery

Value Stream Gross ProfitPercentage

CELL/PROCESSMEASURES

VALUE STREAMMEASURES

KEY PERFORMANCEINDICATORS

Sales Growth

Sales per Employee

On-Time Delivery

Customer Satisfaction

EBITDA

Inventory Turns

Employee Turnover


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Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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Corporate MeasurementsKeyPerformance Indicators The corporate (strategy-level) measures give senior

management answers to basic questions as to how well thebusiness is achieving its goals with regard to:

- Financial results

- Business Growth/Diversification

- Operational improvement & Productivity

- Customer value

- Organization development


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KPI Starter Set Measure Monthly...

Sales GrowthEBITDA

Inventory TurnsSales per Employee

Customer SatisfactionOn-Time Delivery

Organizational

Capabilities

Employee Turnover

Customer ValuePerspective

Financial

Perspective/Business Growth

OperationsPerspective

OrganizationPerspective


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Sales Growth

Measures how fast the business as a whole is

growing from the previous period and over longerone and five-year periods

How to calculate:

- Level in Dollars

- % Growth/(Decline) from Prior Period

- % 1-Year Growth/(Decline) from previous 12-month period

-Average Annual 5-Year Compound Growth


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Earnings Before Interest, Taxes,Depreciation, & Amortization (EBITDA)

EBITDA measures cash flow from operations.

- Equals net income plus interest, taxes and non cash charges such adepreciation and amortization

Dimensions measured:

- Level in Dollars

- % Growth/(Decline) from Prior Period

- % 1-Year Growth/(Decline) from previous year

-Average Annual 5-Year Compound Growth

How to calculate:

*Any other significant non-cash and/or charges, such as write-off of investments, should be added back to income

Net

Income+

Interest

Expense

Amortization]

Expense

Provisions

For incomeTaxes

Depreciation

Expense++ +[


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Inventory Turns

Measures how effectively material flows through the

production process, the stability of the processes & visualsystems, and the lead time for the business.

Shows the total inventory including raw material (at point ofuse), work-in-process, and any completed items.

How to calculate:

- Inventory Turns =Total Inventory Dollars

Cost of Sales


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Sales per Employee

Measures productivity of the company.

Shows value created by the company.

How to calculate:

- Sales per Employee =

-A full-time equivalent employee equals the total hours worked by

full- and part-time workers (including overtime) divided by thenumber of available straight-time hours per employee during theperiod.

Total Sales - Discounts

Avg. Number of Full-Time EquivalentEmployees


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Key Customer Satisfaction by Product

Measured by an index which encompasses the factors that arevalued by key customers of the product.

Dimensions measured:

- Comparison with previous Period (Quarter)

- Comparison with previous year

How to calculate:

- Calculate the weighted average of the indices for the factorsdeemed important by customers (product functionality,product quality, service responsiveness, timeliness, etc.)


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On-Time Delivery

Measures the shipment of the right products in the right numbers

to the customer order.- Shows the effectiveness of the production process in making to

customer demand

Shows the percentage of the scheduled customer order volumesactually shipped on schedule.

How to calculate:

- On-Time Delivery =Orders Shipped on Time

Total Orders Shipped


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Employee Turnover

Measures the satisfaction of employees

Indicates the ability of the company to retain its employees

How to calculate:

- Employee Turnover =

-An Unwanted Departure occurs when a employee leavesthe company prior to the planned departure date

Employee Unwanted Departures

Total Employees


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Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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Value Stream Starter Measurements

Support Measures

- OEE at the Constraint Cell

- Average Projects per Person

- Average Cross-Training per Person

- Number of Safety Incidents

Primary Measures

- Units per Person

- On-Time Delivery

- Dock-To-Dock Time

- First Pass Yield

- Average Cost per Unit Shipped

- Accounts Receivable DaysOutstanding

- Value Stream Gross ProfitPercentage


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Primary Value Stream Measurements

Establish value stream objectives and targets to link toattainment of strategic goals

Monitor attainment of value stream objectives

Identify constraints to value stream performance and directcontinuous improvement at the level of the cell to theirelimination.

Monitor the effectiveness of improvements in eliminatingconstraints to value stream performance.


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Linking Value Stream Goals toMeasurements

Accounts Receivable Days OutstandingCollect cash within30 days

First Pass Yield

Average Cost Per Unit ShippedValue Stream Gross Profit

Zero Defects/Zero Waste

Increase Value Stream Productivity

Dock-to-Dock TimeReduce order fulfillmentlead time to < 1 Day

On-Time DeliveryShip on time in the right

volumes 100% of the time

Units per PersonValue Stream Gross Profit

Increase throughputwith the same resources by 25 %

MEASUREMENTVALUE STREAM OBJECTIVE


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Value Stream Starter SetMeasure Weekly...

- Value Stream Gross Profit

- Average Cost per Unit Shipped- Accounts Receivable Days

Outstanding

- Units per Person

- Dock-to-Dock/Order-to-Dock Time

- First Pass Yield

- On-Time Delivery

- Value Stream Support Measures

FinancialPerspective

Customer ValuePerspective

OperationsPerspective

OrganizationPerspective


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Value Stream Gross Profit Percentage

Measures the profitability of the value stream during the period

Includes the sales value of all shipments from the value stream duringthe period

Includes all value stream costsproduction labor, production materials,production support, operation support, facilities and maintenance, allother value stream costs

Primarily cash based costing--charges costs directly from basicledgerspayroll, accounts payable, depreciation accrual

Limited allocations

How to calculate

Value Stream

Gross Profit %

(Value Stream Revenue Value Stream Costs) X 100

Value Stream Revenue=


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Average Cost per Unit Shipped

Measures the productivity of the value stream during the period.

Includes all value stream costsproduction labor, productionmaterials, production support, operation support, facilities andmaintenance, all other value stream costs

Primarily cash based costing--charges costs directly from basicledgerspayroll, accounts payable, depreciation accrual

Limited allocations

How to calculate:

-Avg. Cost per Unit

Total Value Stream Costs

Total Units Shipped=


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Accounts Receivable Days Outstanding

Measures the average time to collect cash after shipment

How to calculate:

- Calculate the average sales per day and divide it into theperiod-end accounts receivable balance

- AR Outstanding Days =

Average Sales per Day =

Accounts Receivable Balance

Average Sales Per Day

Average Months Sales

Working Days in Month


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Units per Person

Measures throughput and productivity of the value stream.

Shows value created by the value stream.

How to calculate:

- Units per Person =

- Include all full-time equivalent employees dedicated to the

value stream during the period, including first linemanagement.

Units Shipped by Value Stream

Avg. Number of Full-Time EquivalentDedicated Employees of The Value Stream


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Dock-To-Dock/Order-to-Dock Time

Dock-to-Dock Measures the flow of products from receipt of rawmaterials/customer orders to the shipment of finished goods.

Shows the speed of conversion of raw materials or customer orders tofinished product.

- Expressed in hours or days

How to calculate:

Dock-to-Dock Days =

Order-to-Dock Days = Dock-to-Dock Days + Order Processing Days

Units ofControl Partin the Plant

ManufacturedEnd

Products perweek

Days perWeek x


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18,400 pcs/mo

- 12,000 L

- 6400 R

Tray=20 pcs

2 Shifts

Customer

Staging

SHIPPING

2700L1440R

I1 PersonASSEMBLY#2

1200L640R

I1 PersonASSEMBLY#1

1600L850R

I1 PersonS.WELD#2

1100L600R

I1 PersonS.WELD #1

4600L2400L

I200 TonSTAMPING

Coils5 days

I

27,600 sec.avail2 Shifts

Uptime=100%C/O=0

C/T=40 seconds

EPE=2 weeks27,600 sec avail

Uptime=85%C/O= 1 hour

C/T=1 second


Uptime=100%C/O=0

C/T=62 seconds


Uptime=80%C/O=10 minutesC/T=46 seconds


Uptime=100%C/O=10 minutesC/T=39 seconds

Tues &

Thurs1 x

Daily

Michigan

Steel Co.

500 ft. coilsMRP

Production

Control

90/60/30 day

Forecasts

Daily Orders

6-Week

Forecast

Weekly Fax

Daily Ship

Schedule

5 Days

1 Second

7.6 Days

39 Seconds

1.8 Days

46 Seconds

2.7 Days

62 Seconds

2 Days

40 Seconds

4.5 Days

Dock-to-Dock Time

23.6 Days

Value-Added Time

188 Seconds

Weekly Schedule

Dock-To-Dock Time


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First Pass Yield

Measures percent of total units successfully manufacturedthrough the value stream on the first pass without being repaired,

reworked, re-tested or scrapped.

How to calculate:

- The First Pass Yield for the Value Stream is the product of theFirst Pass Yields at each Evaluation Point in the entire valuestream:

FPY at EvaluationPoint (EP)

=Total Units Processed-Not OKs

Total Units Processed

FPY for ValueStream

= FPY(EP1) x FPY(EP2) x FPY(EPn)


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On-Time Delivery

Measures the shipment of the right products in the right numbersto the customer order.

- Shows the effectiveness of the production process in making toschedule.

Shows the percentage of the scheduled customer order volumesactually shipped on schedule.

How to calculate:

- On-Time Delivery = Orders Shipped on Time

Total Orders Shipped


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Supporting Measurements

Identify the focus for improvement initiatives at the cell level.

Calibrate the progress of the value stream in developing aculture of continuous improvement.

Track progress in the ability to use resources flexibly.

Measure progress in creating a safe work environment.

- OEE at the Constraint Cell

-Average Projects per Person

-Average Cross-Training per Person

- Number of Safety Incidents


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Value Stream Level PerformanceManagement

Value StreamMeasurements

Identify PerformanceGaps

Targets

Establish RootCauses of Gaps

ImprovementProjects


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Value Stream Performance ManagementFramework

Cell

ValueStream

Attains Target Misses Target

Attains

Target

Misses

Target

RunningSmoothly

Align celland value

stream targets

Implement cell-levelimprovements that

remove constraints;then reset

targets

Identify constraintsto value stream

performance andrevise cell

targets to meet

value streamgoals


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Value Stream Measures FocusCell-Level Continuous Improvement ...

Value Stream Performance

Measure Resultsagainsttarget

Provide focus for use

of House of Leantools at cell level

Understandpatterns andtrends

Define the

causes ofthe trends

Gap

Cellinitiatives


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Lean Performance MeasurementExercise

To improve these measures Which Lean Tools are Needed where?

Units Shipped per Employeefrom 1,150 to 1,533

On-Time Deliver improvefrom 90-98%

Dock-to-Dock Time from 23.6Days to 4.5 days

First Pass Yield maintainand improve

Accounts Receivable days maintain 30 days

Reduce Average Cost per Unit


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Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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Cell

A group of machines and/or workstations physically andgeographically linked, staffed by a consistent team of operators,

which makes parts or products within a product family.


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Cell Starter Measurements

Support Measures

- Cross Training Chart

- Safety Cross

- 5S Audit

- Number of ImprovementProjects Completed

Primary Measures

- Day by the Hour Report

- Days of Inventory

- (or) WIP to SWIP

- Operational EquipmentEffectiveness (OEE)

- First Pass Yield


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360vu SMLE208 v1.0 Performance Measurement 68

Primary Cell Measurements

Enable the cell production team to monitor and control theirprimary production activities.

Facilitate the collection of problems and issues arising fromproduction.

Provide first-line data for analysis by the cell or thecontinuous improvement team.

The objective here is to keep to takt-image. The measureshelp to keep focus as a dash-board toolvisible to all

owner managed yet also acts as a visual control for managers


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Linking Cell Objectives toCell Measurements

First Pass YieldEliminate Scrap

and Rework

First Pass YieldEliminate Variability

Day-by-the-HourBuild to Schedule

Day-by-the-HourWIP to SWIP

Overall Equipment Effectiveness

Reduce / StandardizeCycle Time

MEASUREMENTCELL OBJECTIVES


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Overall Equipment EffectivenessEliminate Machine Waste

Inventory Days or WIP to SWIPReduce Batch Size

Inventory Days

5S Audit or Self-Audit

Institute Visual

Management

MEASUREMENTCELL OBJECTIVES

Linking Cell Objectives to CellMeasurements (continued)


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Day by the Hour Report

Measures adherence to production schedule.

- Constantly reinforces the need to achieve consistent cycle timeto match customer takt time.

Shows adherence to the production requirement for the cell foreach hour.

- Can be expressed as a quantity for the hour (#/hr) and/or as acumulative quantity for the shift. (#/shift)

How to calculate:

- Cell supervisor records the quantity completed at the end ofeach hour, the cumulative quantity for the day, and anycomments or reasons.

-At the end of each shift, cell supervisor calculates percentagecompleted in comparison to schedule.


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Inventory Days

Measures how effectively material flows through the cell, thestability of the process & visual systems, and the lead time for the

cell.

Shows the total inventory on the cell including raw material (at pointof use), work-in-process, and any completed items.

- Can be expressed in quantity of parts used in production or indollars.

How to calculate:

- Cell operators calculate cell inventory on a weekly basis bycounting material and production kanbans

- Inventory Days =Total Inventory of the Cell

Cell Production Rate


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Measures how effectively material flows through the cell, thestability of the process and visual systems.

Shows the total inventory on the cell including raw material (atpoint of use), work-in-process and any completed items.

Focuses the operator attention on the importance of kanban rulesand single piece flow.

How to calculate

- Cell operators count the total inventory on the celltotalkanbans, number of products, number of representativeparts

- Divide by the standard inventory for the cell

- WIP/SWIP =

WIP TO SWIP

Total Inventory in the Cell

Standard Cell Inventory


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First Pass Yield

Measures percent of total units successfully manufactured onthe first pass without being repaired, reworked, re-tested or

scrapped. Can be expressed for each workstation or for the entire cell.

- Shows where cell-level improvement should be focused.

How to calculate:

- Workstation FPY =

- Cell FPY =

Total Units Processed - Rejects or Reworks

Total Units Processed

FPYWS1 * FPYWS2 * FPYWS3 * ..


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Overall Equipment Effectiveness (OEE)

Measures a combination of availability, performance efficiency,and quality for a machine or a process.

- Identifies waste caused by machine & processinefficiencies.

Shows effective use of machine or cell.

- Can be collected by shift, by day, by product, or byproduct family

How to calculate:

- OEE = Availability * Performance Efficiency * Quality

Availability = Operating Time / Net Available TimePerformance Efficiency = (Ideal Cycle Time * Total Products Run) / Operating TimeQuality = (Total Products Run Total Rejects) / Total Products Run


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Support Measurements

Enable the cell team to monitor and control important

aspects of their work which support the cells primaryresponsibilities.

Cross training chart Safety cross 5S Audit Number of Improvement projects completed


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Cell-Level Performance Management

Establish Targets

Record Daily/ShiftOutcomes

Identify Problems &Causes

Take Corrective Action

Record Daily/ShiftOutcomes

Obtain assistance if needed. Notify improvement team when causes are

beyond scope of the cell team.


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Acme Stamping Initiatives

Pacemaker Loop:

- Objectives

- Develop continuous flow from weld through assembly cell

- Kaizen work elements to reduce total cycle time to 168 seconds orless

- Eliminate weld-fixture changeover time

- Improve uptime on welder # 2 to 100%

- Develop pull system with finished goods supermarket (eliminateschedules)

- Goals

- Only 2 days of finished goods inventory

- No inventory between workstations

- Operate the cell with 3 people at current rate of demand


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Stamping Loop:

- Objectives

- Establish pull system with stamped-parts supermarket

- Reduce stamping batch sizes to 300 (LH) and 160 (RH)

- Reduce stamping changeover times to less than 10 minutes

- Goals

- Only 1 day of stamped bracket inventory in supermarket

- Batch sizes 300 and 160 pieces between changeovers

Supplier Loop:

- Objectives

- Develop pull system with steel coil supermarket

- Introduce daily coil delivery

- Goal

- Only 1.5 days of coil inventory in supermarket

Acme Stamping Initiatives (continued)


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Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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Creating Performance Linkages

StrategicGoals

Key PerformanceIndicators and

Targets

Value StreamObjectives

Value Stream

Measures

CellObjectives

Cell / Process

MeasuresMeas

urements


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Strategic Goals

What is the company trying to achieve?

- Financial

- Customers & markets

- Products & services

- Short-term & long-term


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Examples of Strategic Goals

Increase sales revenue and market share.

Increase cash-flow and reduce debt.

Create a culture of continuous improvement.

Maintain a stable and well-educated workforce.

Develop and commercialize new products.


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Corporate Objectives

How will the company achieve its Goals?

- Specify levels of achievement needed to attain thecompanys strategic goals.

- Set specific and measurable targets.

- Establish specific achievement dates.

- Use goals to develop corporate performancemeasurements.


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EBITDA

Inventory Turns

Strategic

Goals KPIs and targets

Linkage of Strategic Objectives toKey Performance Indicators

Sales Growth

Grow our revenueby 25% over the

next 12 months andincrease market

share to 15% in our3 major markets.

Bring our debtdown to less than

$500,000 andimprove cash flow

from operations by25%.

Sales per Employee


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Value Stream Objectives and Measures

Define the organizations value streams:

- Order fulfillment value streams, new account sales valuestream, product development value stream, etc.

Relate the value stream objectives to the corporate goals.

- The value stream objectives must be the outworking of thecorporate goals.

Use objectives to develop value stream performancemeasurements.


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Linking Strategic Goals toValue Stream Objectives

Increase Thru-Put by 15% withSame Resources

Reduce Order Fulfillment LeadTime from 12 to 3 days

Reduce AR days outstanding to45 days.

Increase Inventory turns to 6 turns

Perfect Quality. Zeroproduct-faulty returns.

Improve Productivity. Cost perUnit of $17.65 or less.

Strategic GoalsValue Stream Objectives

Grow our revenue by25% over the next 12months and increasemarket share to 15%

in our 3 majormarkets.

Bring our debt downto less than $500,000

and improve cash

flow from operationsby 25%.


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Reduce AR days outstanding to 45

days.

Increase Inventory Turns to 6 turns


Improve Productivity. Cost per Unitof $17.65 or less.

Sales per Person

On-Time Shipment

Dock-to-Dock Time

First Time Through

Average Cost per Unit

Accounts Receivable Days Outstanding

OEE at Constraint Work Center

Value Stream Objectivesto Measurements

Value Stream

Objectives

Value Stream Measures

Value Stream Gross Profit Percent


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Cell Objectives

Relate the cell goals to the value stream goals.

- The cell goals must be the outworking of the value streamgoals.

Use goals to develop cell performance measurements.


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Linking Value Stream Objectives toCellular Objectives

Value Stream Objectives Cellular Objectives



Reduce AR days outstanding to 45

days.

Increase Inventory Turns to 6 turns


Improve Productivity. Cost per Unitof $17.65 or less.

Reduce Cycle Time

Build to Schedule

Reduce Batch Size/Single Piece Flow

Eliminate Variability

Effective VisualManagement

Increase OperatorFlexibility


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Cell Objectives Cell Performance

Measurements

Linkage of Cell Objectives to CellMeasurements

Reduce Cycle Time

Build to Schedule

Reduce Batch Size/Single Piece Flow


Effective VisualManagement

Increase OperatorFlexibility

Day by the HourReport

Days of Inventory

OEE

First Pass Yield

# ImprovementProjects Completed

5S Audit

Cross Training Chart


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Exercise

Using the forms on the following pages develop linkages

for the remaining objectives of the starter set reproducedon the following page:

Grow sales and Increase Customer Satisfaction Continuously Improve Improve Employee Retention


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Strategic Goals Value Stream Objectives Cell Objectives

Exercise: Summarize Linking Strategic Goalsto Value Stream Objectives to Cellular Objectives

Improve EmployeeSatisfaction

Improve CustomerSatisfaction

Improve On-TimeDelivery

Perfect Quality

IncreaseResponsiveness

Improve CustomerValue

Provide IncreasedFlexibility

Reduce Number ofSafety Incidents

5S + Safety

Build to Demand


Reduce Cycle Time

Continuously Improve

Reduce Batch Size /One Piece Flow

Institute Standard WorkIncrease Opportunitiesfor Advancement

Increase ProjectParticipation


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Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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Implementation Steps

1. Choose Your Implementation Approach using the Maturity Path

Implementing the starter set

Creating your own linkages

2. Introduce the Measures

Train the Employees

Define the Measurements

Create Visual Displays

Setup a Review Process

3. Manage Performance

4. Disseminate the information


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Lean Manufacturing Maturity Path

Pilot LeanProduction Cells

LeanManufacturingWidespread

Lean Through-Out Company &

Partners


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Successful lean cells

Extensive training in leanprinciples

Kanban pull & 5S

SMED & quick change-over

Standard work Quality at source & self-

inspection

Implementation Approach:

New cell level performance

measurements and targets




Partners

Just Getting Started with Lean


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Stage 2: Lean Manufacturing by ValueStream

Cellular manufacturing with std. work &single-piece-flow

Extensive use of visual systems

Improvement teams trained &established

Initial supplier certification & kanban pull

Manufacturing managed value stream Process control through SPC

Work in Process and Finished GoodsInventories relatively low & consistent

Integrated performance measurements atvalue streams & strategic or corporatelevels




Partners


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Stage 3: Lean AccountingThroughout the Company & Partners

Company organized by value stream

Extensive cooperation with customers,suppliers, & partners

Value streams extend outside our fourwalls

Continuous improvement is a way of life

Lean throughout the enterprise

Target costing driven from the voice ofthe customer linked to features andcharacteristics

Target costing drives internal product

and process design Target costing drives supplier product

design



LeanThroughout Company &

Partners


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1. Choose Your Implementation Approach

Use the starter set of measurements

OR

Develop your own linkages between your corporate strategy andperformance measurements


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Implementing the Starter Set

Introduce the new cell level measurements.

Introduce the new value stream level measurements.

Introduce the new corporate or strategic level measurements.

Eliminate the old measurements.


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Creating Your Own Linkages

Although the standard measurement set is broadlyapplicable, it is only a starting point.

Different companies have different strategies, and theperformance measurements will change according to thechanging strategy.

Working with a cross-functional team, step through theprocess of creating performance measurements at thestrategic level, the value-stream level, and the cell/processlevel.


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Creating Your Own Linkages (continued)

Requires careful and disciplined analysis.

- Identify how company strategy drives performancemeasurements and performance measurements drivebehavior across the company.

Not a one-time exercise.

- Performance measurements change over time as thecompanys strategy changes and as the marketconditions change.

Must involve people at all levels of the business.

- Make it truly cross-functional.


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114 360vusm

LE208 v1.0 Performance Measurement

Performance Measurement for Lean ManufacturingPerformance Measurement Definition

Value Stream

Cell or Process (if

applicable)

DefineMeasurement

How toMeasure it

How toCalculate it

Source of theData

Baseline Date: Result:

Targets Date: Result:

Frequency

Accountability

Presentation

Who Reportsthe

Measurement


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Performance Measurements for Lean ManufacturingCell or Process Performance Measurements

Value Stream

Cell or Process

Value Stream Goals Value Stream ObjectivesList the RelevantValue Stream

Goals andObjectives

Critical SuccessFactors for

the Cell

Objective Date Objective DateList the

Objectives of theCell

List thePerformance

Measures


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116 360vusm

LE208 v1.0 Performance Measurement

Performance Measurements for Lean Manufacturing ValueStream Performance Measurements

Value Stream

Define the Value

Stream

Strategic Goals Strategic ObjectivesList the RelevantStrategic Goalsand Objectives

Critical SuccessFactors for the

Value Stream

Objective Date Objective DateList the

Objectives of theValue Stream

List thePerformance

Measures


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Performance Measurement for Lean ManufacturingStrategic Goals and Objectives

Company Strategy

Important StrategicIssues Related to

Lean Manufacturing

Strategic Goal Strategic Objective Date


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Introduce New Measurements

Cell

ValueStream

Corporate

Create cell performancemeasurement board fordaily control.

Create performancemeasurement board forcontinuous improvement.

Design performancemeasurementpresentation &dissemination methods.

People Define theMeasurements

Create a VisualDisplay

Set Up a ReviewProcess

Train the People

Train cell & processteam-members,managers, &accountants.

Train value streamteam-members,managers &accountants.

Train senior manager& financialaccountants.

Cell team designmeasurements withaccountants & leanspecialists.

Value stream teamdesignmeasurements withaccountants & leanspecialists.

Financialaccountants andlean specialistsdesignmeasurements.

Establish dailyperformance review foreach cell team.

Establish weeklyperformance review forcontinuous improvementteam.

Establish timely review

of corporatemeasurements. Oftenpart of Sales & Ops.Planning.

Introduce Lean PerformanceMeasurement System


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Introduction Tips

Make the presentation of measurements as simple and

graphic as possible.

Make sure there are places on the boards for thepeople to write their comments and suggestions.

Train the people in the use of the measurements, aswell as in the mechanics of creating them.

If possible, have the people manually create their own

performance reporting each day or each week.

Eliminate all other performance reporting.


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Establish Baseline and Targets

Once the measurements have been determined and introduced, allow timeto establish a baseline.

- Allows you to understand where you are now on these measurements.

Have the people develop performance targets from an understanding ofthe baseline:

- Base initial targets upon what is achievable.

- Later, set targets from a knowledge of what the customers value. UseQuality Functional Deployment (QFD) and target costing.

- Later still, allow the teams topursue perfection. As continuousimprovement becomes a way of life, targets become less necessary.


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4. Manage Performance

What performance management does:

- Enables the cell/process team to track & control their own processeseach day & each shift.

- Drives the value-stream continuous improvement team to make changesthat support the companys strategy.

- Enables the senior managers to monitor the companys progress towardsstrategic goals.

What performance management does not do:

- Monitor individuals.

- Identify people doing the wrong things.

- Enable micro-management of the operation.


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Cell

Measure

Strategic

Goal

ValueStream

Objective/Target

ValueStream

Measure

CellImprovementFactors

CellObjective/Target

Guide valuestreamdirection

Refineproduct/market goals

Refinefinancial goals

Refineresource goals

Adjust valuestream resultsthat willachievestrategic goals

Set specifictarget

Establish timeforachievement

Measure theattainment ofvalue streamobjective/targets

Re-visitspecific leancell initiativesthat willachieve thevalue streamgoals/ targets

Adjust cellresults thatwill achievevalue streamobjectives/targets

Set specifictarget

Establish timefor

achievement

Measure theattainment ofcellobjectives/targets

Strategic

Measure

Measure theattainment ofStrategicGoal

Performance Measurement Linkage EnablesPerformance Management


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5. Disseminate the Information

Small companies with single locations.

- Visual and manual- Sales & operations planning

More complex organizations.

- Visual & manual performance measurement locally

- Computer systems to disseminate the information

- Often using simple spreadsheets, database, and graphic presentation

- Sales & operations planning

Large, multi-location, complex organizations

- Visual & manual performance measurement locally

- Performance management and policy deployment systems

- Sales & operations planning and Hoshin policy deployment methods


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Course Agenda



The Starter Set


Value Stream

Cell


Implementation



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Summary The Problem

Traditional cost and management accounting measurementsmotivate non-lean behavior.

If we continue to use traditional measurements we will not beable to sustain lean manufacturing, because themeasurements will push back against the changes.

We cannot have two sets of measurements: one for financialcontrol and the other for operational control.


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Performance Measurements ShouldReinforce the Goals of Lean

Improvement Results

Short cycle times Lower inventories Higher quality On-time delivery Less machine downtime Simpler planning & scheduling

Unfavorable Variances Volume variances Labor utilization variances

Machine utilization variances Overhead absorption

variances


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Summary The Solution

New performance measurements are needed for LeanManufacturing.

Implement the starter setof performance measurements forproduction cells, value streams, and the corporation.... ordevelop your own!

Use performance measurements to drive your businessstrategy throughout the organization.

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What Does a Lean PerformanceMeasurement System Look Like? Strategically focused and aligned

Primarily non-financial

Simple and easy-to-use

- Manually created

- Graphically posted

Changes over time and between locations

Provides immediate and timely feedback

- Daily, weekly, monthly

Fosters continuous improvement

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How Will This Change What YouMeasure Tomorrow?

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L E A N

E N T E R P R I S E

Thank You.

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P E R F O R M A N C E M E A S U R E M E N T

F O R T H E L E A N E N T E R P R I S E


v1.0

APPENDICES

Recommended Readings

Glossary


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RECOMMENDED READINGS

Becoming Lean: Inside Stories of U.S. Manufacturersby Jeffrey K. LikerProductivity Press, 1998

Becoming Leanuses first-hand accounts, performance records, and real numbers to show howactual U.S. manufacturers have gone lean. Learn what they learned about the logistical andpeople issues related to a Lean transformation and what the results of that transformation meantto these businesses.

The Goal (A Process of Ongoing Improvement)by Eliyahu M. Goldratt and Jeff CoxNorth River Press, 1992

The Goalintroduced the Theory of Constraints to American business. A fast-paced novel, TheGoaluses fiction to vividly demonstrate how to overcome the barriers to making money. Used asa management text in business schools across the United States, this book offers real worldguidance on identifying and solving chronic productivity and quality problems.

Lean ThinkingBy James P. Womack and Daniel T. JonesSimon & Schuster, 1998

In Lean Thinking, Womack and Jones show how the principles of Lean production, described inThe Machine That Changed the World, have been successfully applied outside the automobileindustry. They document the transformation of 25 U.S., Japanese, and German companiesthrough the application of Lean thinking. (The description of the arrival of the Japanese sensei

at the Porsche plant in Germany alone is worth buying the book.)

The Machine That Changed the WorldBy James P. Womack, Daniel T. Jones, and Daniel RoosHarperCollins, 1991

The authors, who directed MIT's five-year study on the future of the automobile, explain thedevelopment and the principles of Lean production. The descriptions of the application of theprocess show not only howit works, but also whyLean manufacturing results in more cost-efficient products and is transforming manufacturing around the world.

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World Class Manufacturing: The Next DecadeBy Richard J. SchonbergerFree Press, 1996

How do you judge the worth of a company? In this book, Schonberger challenges the assumption thatworth is measured according to sales and profits. Using benchmark data derived from real-worldresearch, he shows how competence, capability, and customer-focused, employee driven performancedefine worth and can be measured.

Toyota Production SystemBy Yasuhiro MondenEngineering & Management Press, 1997

Toyota Production Systemprovides detailed examples of how to apply the lean tools. It considers how toadapt production schedules to the demand changes in the marketplace while satisfying the goals of lowcost, high quality, timely delivery, and improved worker morale.

Real Numbers: Management Accounting in a Lean Organization

By Jean E. Cunningham and Orest J. Flume with Emily AdamsManaging Times Press, 2003

Real Numbers describes how management accounting evolved to this point and how simplicity and claritycan be restored, particularly in a lean organization.

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GLOSSARY

TERM DEFINITION

5S System A system designed to organize and standardize a workplaceand consisting of five component parts: Sort, Set in Order,Shine, Standardize, and Sustain.

8 Wastes Wastes addressed by Lean manufacturing that include:overproduction, waiting, transportation, non-value addedprocessing, excess inventory, defects, excess motion, andunderutilized people.

8D or 8Discipline The eight-step Ford methodology for problem solving.

Batch-and-Queue Processing Producing more than one piece of an item and then movingthose items forward to the next operation before they are allactually needed there. Thus these items need to wait in aqueue. Also called Batch-and-Push. Contrast withcontinuous flow.

Bottleneck A resource whose capacity is less than the demand put on it.

Buffer Inventory The strategically placed inventories that protect the materialflow and whose consumption set the schedules in a PullSystem.

Buffer Stock Finished goods available to meet Takt Time when variationsin customer demand exist.

Capacity-Based Lot Sizing An approach to calculating batches on a setup-intensiveresource that is based on the capacity of the resource, noton unit cost.

Catchball The handing back and forth of information between workersand management and the subsequent feedback.

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Cell Operating a true continuous flow on machines and workstationsplaced close together in the order of processing, sometimescalled a U shape. Cell operators may handle multipleprocesses, and the number of operators is changed when thecustomer demand rate changes. The U shaped equipment

layout is used to allow more alternatives for distributing thework elements among operators, and to permit the leadoff andfinal operations to be performed by the same operator.

Cellular Manufacturing Linking of manual and machine operations into the mostefficient combination to maximize value-added content whileminimizing waste.

Changeover When a piece of equipment has to stop producing in order to befitted for producing a different item; for example, the installationof a different processing tool in a metal working machine, a

different color paint in a painting system, a new plastic resin &mold in an injection molding machine, loading differentsoftware, and so on.

Charter A document that clearly defines the focused kaizen teammission, scope of activities, risks, and deliverables (if requiredby management to provide additional details).

Continuous Flow Processing The process by which items are produced and moved from oneprocessing step to the next one piece at a time. Each processmakes only the one piece that the next process needs, and the

transfer batch size is one. Also called single-piece flow orone-piece flow. Contrast with batch-and-queue processing.

CONWIP Constant Work In Process. This is another way of definingFIFO. (See FIFO.)

Core Team The designated group of people primarily responsible forcompleting the details of the plan.

Cycle Time How frequently an item or product is actually completed by aprocess, as timed by direct observation. Also, the time it takesan operator to go through all of his or her work elements before

repeating them.

Defects Waste Inspection and repair of material in inventory.

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Demand/Customer Demand Also commonly referred to as Takt Time. (See Takt Time.)

Direct Consumption Kanban A Kanban approach which replenishes an inventory buffer inthe quantities withdrawn, thus allowing any variability incustomer demand to propagate through the supply chain.

EPEI Refers to the every-part-every interval, which is a basis forproduction batch size. For example, if a machine is able tochange over and produce the required quantity of all the high-running part types dedicated to it within three days, then theproduction batch size for each individual part type is aboutthree day's worth of parts. Thus this machine is making everypart every (EPE) three days.

Excess Inventory Waste Any supply in excess of a one-piece flow through yourmanufacturing process.

Extended Team Member An individual who provides expertise to the project team, butwill not have the responsibility of implementation.

Fabrication Process Segments of the value stream that respond to requirementsfrom internal customers. Fabrication processes are oftencharacterized by general-purpose equipment that changes overto make a variety of components for different downstreamprocesses. Compare to pacemaker process.

FIFO Stands for first-in, first-out, which means that materialproduced by one process is used up in the same order by thenext process. A FIFO queue is filled by the supplying processand emptied by the customer process. When a FIFO queuegets full, the supplying process must stop producing until thecustomer process has used up some of the inventory. FIFO issometimes called CONWIP, or Constant Work In Process.

Fixed Replenishment Interval A production cycle in which goods must be produced in a fixedsequence.

Flow A main objective of the entire Lean production effort, and one ofthe key concepts that passed directly from Henry Ford to Taiichi

Ohno (Toyotas production manager after WWII). Fordrecognized that, ideally, production should flow continuously allthe way from raw material to the customer and envisionedrealizing that ideal through a production system that acted asone long conveyor.

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Heijunka The act of leveling the variety and/or volume of items producedat a process over a period of time. Used to avoid excessivebatching of product types and/or volume fluctuations, especiallyat a pacemaker process.

Heijunka BoxA physical device that visually displays the product family.Pitch and work orders for meeting daily demand arerepresented by Kanbans.

Inventory All of the money invested by purchasing goods intended forsale.

Inventory buffer A quantity of inventory located at a specific point in the valuestream to protect the flow of material and to providereplenishment schedules.

Just-in-Time (JIT) Producing or conveying only the items that are needed by the

next process when they are needed and in the quantity needed.

Kaizen Continuously improving in incremental steps.

Kanban A signaling device that gives instruction for production orconveyance of items in a Pull System. Can also be used toperform Kaizen by reducing the number of Kanban incirculation, which highlights line problems.

Kanban Quantity The replenishment quantity of material authorized by a Kanban.

Lead Time The time required for one piece to move all the way through aprocess or value stream, from start to finish. Envision timing amarked item as it moves from beginning to end.

Lean A systematic approach to identifying and eliminating waste(non-value-added activities) through continuous improvementby flowing the product at the pull of the customer in pursuit ofperfection.

Lean Enterprise The organization that fully understands, communicates,implements, and sustains Lean concepts seamlesslythroughout all operational and functional areas.

Leveling The process or method used to distribute work within the valuestream to maximize material and information flow efficiency.

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Line Balancing A process in which work elements are evenly distributed withinthe value stream to meet Takt Time.

Location Indicator A type of red tag that shows where an item belongs. Theseinclude lines, arrows, labels, and signboards.

Material Handlers Production-support persons who travel repeatedly alongscheduled routes within a facility to transfer materials, supplies,and parts in response to pull signals, and to make pacedwithdrawal of finished goods at pacemaker processes.

Material RequirementsPlanning (MRP)

A computerized system typically used to determine the quantityand timing requirements for delivery and production of items.Using MRP specifically to schedule production at processes ina value stream results in Push production, because anypredetermined schedule is only an estimate of what the next

process will actually need. Manufacturing Resource Planning(often called MRPII) expands MRP to include capacity planning,a finance interface to translate operations planning into financialterms, and a simulation tool to assess alternative productionplans.

Milk Run Routing a delivery vehicle in a way that allows it to makepickups or drop-offs at multiple locations on a single travel loop,as opposed to making separate trips to each location.

Mixed-Model Scheduling An approach to scheduling final production processes which

smoothes out demand on the supply chain by producing someof each item over the shortest possible time horizon. (SeeHeijunka.)

Motion Waste Any movement of people or machines that does not add valueto the product or service.

Muda See Waste.

Non-Bottleneck A resource whose capacity exceeds the demands put on it.

Non-Repetitive Demand Independent demand that does not require inventory buffers tomeet customer service requirements.

Non-Value-Added Any activity that does not add market form or function or is notnecessary. (These activities should be eliminated, simplified,reduced, or integrated.)

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Operating Expense The total amount of money spent to convert inventory intothroughput.

Operator Balance Chart A seven-step process used to meet customer demand or Taktthrough optimal human and equipment efficiencies.

Order Point The buffer inventory level at which a replenishment order mustbe placed.

Order Quantity The amount of a replenishment order.

Overproduction Making more than is required by the next process. Makingearlier than is required by the next process, or making fasterthan is required by the next process.

Paced Withdrawal A timed sequence of withdrawal of finished product from the

pacemaker process. Paced withdrawal is a tool for pacing anassembly process and becoming aware of production problemswithin a pitch increment.

Pacemaker Process A series of production steps, frequently at the downstream(customer) end of the value stream in a facility, that isdedicated to a particular product family and responds to ordersfrom external customers. The pacemaker is the most importantprocess in a facility because how you operate here determineshow well you can serve the customer, and what the demandpattern is like for upstream fabrication processes.

Pack-Out Quantity The number of units/parts that can be moved throughout thevalue stream to ensure flow efficiency. Pack-out quantity mayor may not be customer driven.

Pitch When Takt Time is too short for a reasonable pacedwithdrawal, it can be adjusted upward to a consistent incrementof work called pitch, which becomes the basic unit of yourproduction schedule for a product family. Pitch represents thefrequency at which you withdraw finished goods from apacemaker process as well as the corresponding amount ofschedule you release to that process. Pitch is often calculatedbased on the customers ship container quantity.

Point of Use Storage (POUS) Raw material stored at the workstation where it is used.

Process Cycle Time The amount of time taken to produce one good part before itcontinues to the next process in the value stream.

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Process Kaizen Improvements made at an individual process or in a specificarea. Sometimes called point Kaizen.

Processing Time The time a product is actually being worked on in a machine orwork area.

Processing Waste Effort that adds no value to the product or service from thecustomers viewpoint.

Product Family A group of products that goes through the same or similardownstream or assembly steps and equipment.

Production Kanban A printed card indicating the number of parts that must beproduced to replenish what has been consumed from thesupermarket.

Production Smoothing See Heijunka.

Pull System An information system for controlling and improving the flow ofmaterials and information and for allocating resources based onactual consumption, not forecasted demand.

Push System A system where resources are provided to the consumer basedon forecasts or schedules.

Quality at the Source When operators are given the means to perform inspection atthe source, before they pass it along. A final inspection stationis not required when quality at the source is used.

Queue Time The time a product spends waiting in line for the nextprocessing step.

Quick Changeover Changing over a process to produce a dif

Documents

Lean Mesurement Book