Matt Hrivnak

Kaizen: There's always another future state

Archive for April, 2008...

Filed under Kaizen, Lean, productivity

How to calculate OEE: 

OEE stands for Overall Equipment Effectiveness and is the most comprehensive calculation used to determine how effectively you are utilizing your equipment.  It is an important part of total productive maintenance, can help better calculate efficiency losses, and is useful when incorporated into the cycle time calculations.

In order to calculate OEE, you will need to collect some data:

  1. PERFORMANCE RATE – The Performance Rate is calculated by looking at the actual operating speeds of your machines in comparison to the operating speeds that they were originally designed for those machines or the products being run on them.
    • Product A was designed to run on Machine 1 at speed setting 10, the highest speed possible.  Due to the machine’s old age and fragile state, it can only run safely and produce good versions of Product A at a speed setting of 6.  The Performance Rate would then be 60% (i.e. 6 / 10
  2. AVAILABILITY RATE – The Availability Rate is calculated by measuring any production losses due to downtime from equipment failing, breaking down, etc. as a portion of scheduled manufacturing time.
    • Machine 1 runs 36 hours for every 40 available manufacturing hours due to breakdowns.  The Availability Rate is then 90% (i.e. 36 / 40).
  3. QUALITY RATE – The Quality Rate is calculated by determining the amount of losses due to quality issues like scrap and rework as compared to the total parts processed.
    • Machine 1 ran 100 pieces of Product A, but only 98 met the quality specifications.  The Quality Rate would then be 98% (i.e. 98 / 100).

 Now, once you have these 3 important measures, the calculation of OEE is very simple:


Using the examples from above (Performance Rate = 60%, Availability Rate = 90%, Quality Rate = 98%):

          60%  x  90%  x  98% = 52.9%

 Essentially, the OVERALL EQUIPMENT EFFECTIVENESS (OEE) is the % of effective use that you are getting out of your piece of equipment.  It is a compounding, thorough look at your true equipment uptime as a percentage of your total available manufacturing time.  This metric is important for loading workcenters and determining capacities because you are completely aware of a particular machine’s (or machine type) total ‘real’ uptime.

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Comments (1) Posted by matt on Saturday, April 26th, 2008

Filed under Six Sigma

The Quality Paradigm:  Six Sigma

Born out of the 1980s and the need to improve Motorola’s quality, Six Sigma is the most recognizable quality program out there.  At the time when Bill Smith first developed the methodology behind Six Sigma, other quality programs were already spreading their way around the business world.  Most of these programs were referred to as “buzzwords” and never taken very seriously.

The true history of applied quality dates back to the early 1900s, with several main contributors like Walter A. Shewhart, Joseph M. Juran, Kaoru Ishikawa, and Genichi Taguchi.  While they played an important part in the foundation of statistical quality control thinking, they are not the most widely known, especially outside of Quality Engineering. 

During the 1950s and 60s, Dr. W. Edwards Deming was working with Japanese companies to help improve their quality and production processes.  He developed several basic quality and managerial ideas, first noted as his ‘14 Points for Management.’  Later, he would introduce what was termed the ‘Deming Cycle’, which is methodology for problem solving that followed a continuous, circular path:  Plan-Do-Check-Act (PDCA).  His ideas drastically improved the quality and efficiency of products coming out of Japan.  He would go on to win several awards until his death in 1993.

At the same time Deming was working in Japan, Armand V. Feigenbaum was developing his own set of quality initiatives at General Electric would come to be known as “Total Quality Control”.  This was the main subject in his book, Quality Control:  Principles, Practice, and Administration, which was later renamed, Total Quality Control.  In the years since, this has all been grouped into an idea called Total Quality Management (TQM).  TQM, which is commonly referred to as the precursor of much of Six Sigma, is a management approach to quality in which every customer concern is regarded in high esteem and every employee is responsible for maintaining the highest level of quality.

Six Sigma continues this approach with every employee’s interactions with products and the subsequent response from customers, both internal to the company as well as the end user.  There is a process, which is more or less the skeleton of Six Sigma, and closely related to the Deming Cycle:  the DMAIC process.  This process is a defined methodology to problem solving, where each letter stands for a different phase of a quality control project. 

In order of execution:

Define:  Define the problem at hand.

Measure:  Begin measuring the problem area or process to determine the current capabilities

Analyze:  Analyze the data from the Measure phase

Improve:  Develop and implement measures to correct the underlying problem as realized in the Analyze phase

Control:  Continue to monitor the implementations and repeat the process continually

 That, in a nutshell, is an overview of Six Sigma and its history.  At the present time, there are always companies trying to implement a Six Sigma program to improve their quality.  Just like Lean Manufacturing, sometimes they fail and sometimes they succeed, and it’s all determined by the management involved.  Six Sigma also incorporates the certification of several individuals within the company at various levels in a fashion similar to Karate, as there are Black Belts, Green Belts, Yellow Belts, etc.  This practice, which once grew Six Sigma, is now a haven for under trained and over certified individuals as you can get a Black Belt just by going online and paying a few dollars.  Sadly, many lazy managers will resort to hiring Black Belts to do the Six Sigma implementation instead of doing the work themselves. 

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Comments (1) Posted by matt on Thursday, April 24th, 2008

Filed under Economics, Lean, Lean Stocks

Questions people often have:  What are the long term effects of Lean Manufacturing?  What does Lean Manufacturing do for a company?  What are the benefits of Lean Manufacturing? How can I engage management and stakeholders so that Lean is taken seriously? etc.  I guess the proof really is in the pudding.  People can deny it all they want, but Lean works.  This simple post, showcasing three stocks that have all had been significant in the progression (and in a lot of cases, regression) of manufacturing principles and techniques, tells the story.  In the chart below, I’ve overlaid the following stocks, Toyota (NSYE:  TM), Ford (NYSE:  F), and General Motors (NYSE:  GM) for the comparison of their performance over the past 30+ years.  Now, when you compare stocks, they are graphed by % gain over time, allowing you to see the real difference in the stocks. 

Look at how GM (BLUE LINE) remains rather flat, while Ford (YELLOW LINE) makes some gains and then retraces, and then, then look at Toyota (BLACK/RED LINE), who makes consistent gains, retraces ever so slightly, and then makes bigger gains, and so on.  That consistency and longterm growth is what all Lean companies are striving for; that is why you implement Lean.  Seriously, look at the difference in % gain (which essentially shows you what % you would have made on your money if you invested it at the time this chart began):  Toyota topped out at 9,500%!!!, F topped out at 1,200%, and GM barely cracked 200%.  It’s even more stimulating to see that at the present time (far right side of the chart), GM and F are both close to being a wash.  Well, in reality, you might have even lost money due to inflation, the time value of money, opportunity cost, etc.  And then look at Toyota at the present time, if you’d put money into this stock in 1974, you would be up a mere 6,500% – not bad for an automaker stock!!  This is always a good chart to show to anyone that doubts the significance of Lean Manufacturing and the exceptional company that Toyota has been, and will continue to be in the future.  An even better chart is this next one, which shows the difference in these stocks over the past 10 years. 


If you would have invested in Toyota 10 years ago, you’d have made 95% on your money, almost doubling it, assuming you still held it today.  In fact, at one point you could have sold it at the high time in early 2007 and made ~165% on your money.  And then there’s Ford and GM.  If you would have put your money into either one of these companies 10 years ago, you’re looking at losses of up around 60% for GM and 65% for Ford.  When the times got tough, Toyota started to diverge from F and GM, and both of these graphs illustrate this point perfectly. 

 I’m a fairly active trader always willing to make investments in companies just making the transition to Lean.  Now, a lot of companies do not come right out and say it, but you can sometimes find this information through press releases or news coming out of publicly held companies, either by information you gain from your trading company or by using a resource like (which is where this chart was generated!).  Not only are Lean Manufacturing companies worth working for and doing business with, they are also very much worth a little piece of your portfolio.  Cheers!

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Comments (0) Posted by matt on Tuesday, April 22nd, 2008

Filed under Lean, Lean Quotes

“Kanban is like the milkman. Mom didn’t give the milkman a schedule. Mom didn’t use MRP. She simply put the empties on the front steps and the milkman replenished them. That is the essence of a pull system”
– Ernie Smith, Lean Event Facilitator in the Lean Enterprise Forum at the University of Tennessee

Now, this quote was passed on to me in an email about two years ago.  I don’t know if the quoted individual is correct, so if anyone knows otherwise please email me.  I have heard several similar quotes regarding Kanban and the milkman, as well as other metaphors regarding replishment systems.  Regardless, I wish that more people were aware of this reference.

I don’t know Mr. Smith, but I’m sure he’s a good man (I base that off of the fact that he’s spreading the good word of Lean Manufacturing!).  I like the way that this quote brings all readers into understanding through the use of something so natural and simplistic as a reference to one’s mother.  Surely, if your mother could participate in a Lean activity like a self replenishing pull system without even knowing it, then it must work pretty well if it never interrupted her daily schedule and provided for exactly what your family needed!  Now, I know not everyone was raised around their mother, but the simple idea helps bridge the gap between a supposed structured and rigid system imposed by managers to one of simplified flow.

Sometimes, people new to supermarkets, kanban, and pull system really have a hard time getting it.  They think that you can plug and play supermarkets filled with nice stacks of kanban cards and everything will simply work because you designated an area for it.  In regards to this quote, I’ve seen several cases where a supermarket has been setup and the operations around it just pull and make whatever the MRP is telling them to do.  Again, supervisors and managers want to make it look like things are always running at 100%.  I want nothing less than 100%! I hear that way too often.  That’s why it requires a complete effort from all within the company, but back to the quote.

A good portion of the time, a company will not have the luxury of producing only 3 or 4 types of products.  Usually, you’re looking at figures that are closer to 10, 50, 100 or even 1000’s of different products; all that need to be scheduled and made at different times, in different amounts, throughout the year.  This is where it gets interesting and you need to do some math.

You probably wouldn’t be resorting to the use of a supermarket if you could establish Continuous Flow in the first place.  So, now after you’ve relayed all of your equipment into cells based on the results from your recently done Product Family Matrix, you’re running the numbers to see what your least common denominators are.  Usually (going on basic assumptions) as you go upstream in your process you will see fewer and fewer variations of WIP that will later be transformed into an array of possible product configurations.  Well, it’d be nice to have each of these stored in a supermarket so that you could just pull what you need and then replace it, but most likely, it won’t be that smooth.

In most of the companies I’ve worked in, there have been so many product possibilities that I’ve had to go with the good old 80/20 rule and ended up with a small amount of supermarketed items that in the end will make most of my products.  The 80 stands for 80% of your total production, and the 20 stands for 20% of your total product count.  Clarifying that, it means that 80% of your production can be accounted for by 20% of your products.  A very simple example of this:  You make 5 products in your bread making cell – White, Wheat, Rye, Whole Grain, & Pumpernickel.  For every 20 that you sell, it breaks down like this:

  • White:  16 (accounts for 80% of sales)
  • Wheat:  1 (5%)
  • Rye:  1 (5%)
  • Whole Grain:  1 (5%)
  • Pumpernickel:  1 (5%)

So, in this very simple model, you’d use a pull system on White bread because you consistently require it based on customer demand.  Think of that scenario, but blown across 1000’s of products.  Instead of one item in your supermarket, how many would you have?  5? 10?  Figuring that out is simple enough, it is getting it to work that is the hard part.

MRP, Master Schedulers, Planners, etc. – they can all screw it up just by doing their job.  They have to be involved and MRP systems need to be adjusted, either through a built in function to work within such systems or manually, if no such feature exists in your current software.  It’s one thing to instruct someone to not make a product because there is already a supermarket full of it across the aisle, but it’s another thing to get them to actually practice it.  Supermarkets, kanbans, pull systems, whatever name your company uses, act independently from supervisors, planners and MRP. 

Kanban the Milkman makes the rounds, quietly moving product into empty spaces left by products used only minutes before; making and replenishing his whole way back to the most basic raw materials.  He’s good and if you just let him do his job – you’ll be all the better for it!!

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Comments (3) Posted by matt on Wednesday, April 16th, 2008

Filed under Kaizen, Lean, Lean Book Reviews

‘Lean Lexicon, a graphical glossary for Lean Thinkers’

Compiled by the Lean Enterprise Institute

While this is not your traditional style of book, the ‘Lean Lexicon‘ contains so much great material that I just had to post it in a book review.  This book is just what it says it is, ‘a glossary for Lean Thinkers.’  Whether you are new to Lean Manufacturing or consider yourself an expert, this would should be in your Lean library.  The book is sorted in alphabetical order, and setup so that related topics point to one another, which makes for easy connections between lean tools and applications.  Also, another beLean Lexiconnefit is the inclusion of historical figures such as the Kiichiro Toyoda, Sakichi Toyoda, Shigeo Shingo, and Taiichi Ohno.  It lists everything you could ever want to know about Lean (at least from a basic definition basis), including some lesser known topics like A-B Control, Chaku-Chaku, Demand Amplification, Kaikaku, and Capital Linearity.  These are the types of topics that hold Lean together and are known to Lean experts, but often overlooked by rookie Lean implementors who stick to the mainstream tools like 5S and SMED.

 Overall, there is very little that this book could be accoused of lacking, and I can’t think of anything off the top of my head.  Add this book to your Lean library and pick up a copy for your coworkers or employees so that you, and they, can reference topics in the midst of a Lean transformation!

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Comments (0) Posted by matt on Monday, April 14th, 2008

Filed under Kaizen, Lean, Lifestyle, Six Sigma

What is Kaizen?  Many people that are new to Lean Manufacturing will at some point end up saying, “Kaizen?  What is Kaizen?  What do you mean by Kaizen?  What does Kaizen do?”  Several terms and definitions come to mind when talking about Kaizen.

On page 24 of The Toyota Way, Liker comments, “Kaizen is a total philosophy that strives for perfection and sustains TPS on a daily basis.”

Kaizen is a Japanese term meaning “Change for the better” or “improvement”.  It is most commonly translated into English as “Continuous Improvement”.  Kaizen is one of the forerunners in Lean thinking and requires discipline and constant re-evaluation.  It works on the basis that nothing can ever become perfect.  There is always something that can be improved.

Kaizen on a company scale can mean several things.  As part of a continuous improvement culture, most companies hold what are called Kaizen Events.  These are generally an activity that remove people from their daily tasks and place them on a team, to accomplish a goal within three to five days.  These are highly targeted projects with achievable results, such as moving machines so that they can work closer to one another for continuous flow, or designing and implementing a new queuing system for a specific purpose, or a SMED event (What is SMED?), etc.  No matter what the goal is, the process is relatively the same:  Plan, Do, Check, Act.

Plan, Do, Check, Act (PDCA) was developed by W. Edwards Deming and introduced in Japan in the 1950s.  It is based on the Scientific Method and is a precursor to Six Sigma’s DMAIC process (Define, Measure, Analyze, Improve, & Control).  This is how PDCA breaks down:

  • Plan – Develop a sound, well thought out goal (that can be achieved with moderate effort) and how to achieve it.
  • Do – Implement the ideas and/or changes needed to achieve the goal, including training.
  • Check – Review what you’ve done; be critical, but not negative.
  • Act – Depending on how the Check step went, sustain these results or perform the whole PDCA cycle over again.

You can see that this is pure continuous improvement as the cycle can be completed over and over again.  In the Toyota Production System, they have slightly changed this language to be Plan, Try, Reflect, and Standardize.  Different verbiage, but same expectations of process and results.

Typically, most Lean training and resources define two types of Kaizen:  System or Flow Kaizen and Process Kaizen

A System or Flow Kaizen deals with an entire value stream being evaluated for opportunities of improvements and will usually include action from several levels of management. 

A Process Kaizen is a concentrated improvement of a single process (or groups of the same type of process).  This type of Kaizen will usually include a cross functional team dedicated to improving that individual process.

Both of these types of Kaizen are abundant in any successful Lean enterprise, and are at the very heart of those organizations.  Working within a company that needs help implementing Lean can begin to wear on your mind, especially if you are the agent of change.  For my entire professional career I’ve had to take on this role.  You push and push everyday for changes because you can see the waste sitting all around the plant and office; in stacks of wasted inventory and DMR’d materials to frivolous steps in product development processes.  It’s tough to keep a positive attitude. 

Over time I’ve learned to incorporate the idea of Kaizen into everything that I do.  I make it a habit to say this word to myself over and over again at different times during the day.  While at work, it keeps me in the moment and opens my mind to thinking that everything can be made better if we just apply ourselves a little bit more.  Now, I tend to Implement Then Perfect which is a good, offset definition (sort of) of Kaizen, where as early on in my career I would spend too much time pondering possibilities instead of just doing.  This creates better outcomes and makes you think on a Results Driven basis, which is really the way you want to think – you will constantly grow and improve – just like a company that is maintaining a strong Kaizen mentality.

On a personal level, use Kaizen to improve you life and it will work its way into your professional career.  Incorporate it into your daily life with exercise, eating habits, vices, etc.  If you want to start working out, start small and build from there – add a little bit everyday.  That’s small, incremental improvements that work.  If you eat too much, try to eat 1 less bite at 1 meal every other day, and eventually move up to 1 bite for every meal, everyday.  If you smoke and want to quit, cut back slowly and your body will respond favorably.  These methods work for you and the same type of stepwise improvements drive positive changes in your company.

If you know someone who claims to be perfect – they’re not.  Even a lot of the most successful people will tell you that they are not perfect and that that belief is what got them to where they are today – and it keeps them there.  You maybe thinking:  “Won’t that thinking just make me depressed?”  The truth is, no, it won’t.  Once you allow yourself to see the flaws that are holding you back, you will be much more likely to overcome them.  A good motto that I try to live by is:  Always be happy, but never be satisfied.  That is the essence of Kaizen.  That will bring continuous improvement to your life.  That is Kaizen.

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Comments (0) Posted by matt on Wednesday, April 9th, 2008

Filed under Lean Book Reviews

‘The Toyota Way’ 

By Jeffrey K. Liker

I’ve read and reviewed literally dozens of Lean and Six Sigma books, and ‘The Toyota Way (14 Management Principles From the World’s Greatest Manufacturer)’ is one of the great ones.  The Toyota WayIt is a swift and meaningful read with pages and pages of detailed, historical data explaining thoroughly the essence behind Toyota and the Toyota Production System.  If there is one caveat, I would have to say it’s the fact that the book’s practical applications are a little lacking.  I say that because it is such a complete retelling of Toyota’s dominance that in the end, it leaves the reader thinking, “Okay, that’s great, but how exactly do I accomplish that at my company?”  The step by step, visually demonstrated process that is typical of a Lean book is the big piece that most readers will wish was thereThe Toyota Way Fieldbook.  Liker did help remedy this in a few ways by introducing The Toyota Way Fieldbook (co-written with David Meier) which offers practical and applicable solutions for implementing much of Toyota’s systems.

The great things about The Toyota Way are all of the aspects that you wouldn’t necessarily find in any other Lean book.  Among these are intricate parts of Toyota’s system including tidbits like the difference between a Toyota manager and the average, classically trained U.S. manager, or the fact that The Toyota Way is more of a ‘condition’ or ‘state of mind’ than just a cut and paste production system.  Great quotes abound, as each chapter starts with a few words from a notable Lean implementer.

I recommend this book wholeheartedly and if you ever attempt to put your head around the Toyota Production System and Lean – this is the book to start with.  Not only do you learn the basic structure and methodologies, you get the raw, harsh reality of the path that the Toyota Production System took from its inception until the present.

Buy this book.  You will learn a lot while being able to appreciate the rich history.

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Comments (0) Posted by matt on Wednesday, April 2nd, 2008

Filed under Economics, Kaizen, Lean

While working in a textile factory in the early 1900s, Sakichi Toyoda saw a problem with the way the textile looms ran:  if one of the threads broke, the machine would continue to produce bad product until an operator noticed that the break had occurred.  Improving upon this, he developed a self-monitoring device that stopped the loom when one of the threads broke.  This produced dramatic improvements in quality, as well as freed up operators that had previously spent much of their workday watching looms for quality.  That particular invention is still used in many textile operations around the world, as well as in most manufacturing processes in general.  It wasn’t the particular application that was important; it was the overall idea.  This idea was later termed Jidoka, and when translated into English, literally means “automation with human intelligence”.  This idea would become one of the two main pillars of the Toyota Production System (TPS), and is still in use in every Toyota operation and process.

The second pillar of TPS was developed by Sakichi Toyoda’s son, Kiichiro, and is called Just-In-Time.  In the 1930s, Kiichiro, the founder of the automotive branch of the Toyota group, theorized that he could keep the entire production process stocked with needed goods if the previous operation would respond to the precise needs of the downstream process.  This thinking dramatically reduced the amount of time operators spent waiting for parts to work on, while limiting the amount of the waste in the process.  He would continue this idea by working closely with suppliers to level production and ultimately, reduce all excess inventory levels.  Jidoka and Just-In-Time were both developed before the start of World War II.

After the war, one of Toyota’s executives continued the development of TPS and is credited as the chief architect of the system that is still in use today.  As chief of production, Taiichi Ohno developed TPS into a company wide cultural experience which required each associate to participate.  In many American factories, then and now, operators were reluctant to add their input and often feared change.  Conversely, Ohno praised change and suggestions from everyone.  During his tenure (and with the assistance of the famed consultant Shigeo Shingo), Toyota invented many “tools” which would come to encompass much of Lean Production.  Two such tools, 5 S and Single Minute Exchange of Dies (SMED), have been written about extensively, and are often some of the first steps a company will take while trying to implement the system.  Over the years this developed into the idea known as Kaizen, which when translated means “continuous improvement”.  This idea still stands as the overall image of Toyota, as they are always re-evaluating every process, from order taking to final inspection.

After the publication of The Machine That Changed the World, companies began to familiarize themselves with Lean Production and the toolset became common knowledge.  The overall concept of Lean is what prompted this blog.  As you will read throughout this site, Lean is not an idea, it’s a way of life.  It is about embracing change and being able to look inward and realize that there are always improvements that can be made.  Once a company adapts this kind of thinking, they are consistently able to find themselves improving in all areas, from on-time delivery to quality!

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Comments (0) Posted by matt on Tuesday, April 1st, 2008