Integrating Value and Lean Management in Manufacturing Processes

Integrating Value and Lean Management in Manufacturing Processes Luís Maria Fraga Cabral Sacadura

Alexandra Maria Baptista Ramos Tenera

Mechanical and Industrial Eng. Department Faculdade de Ciências e Tecnologia, FCT, Universidade Nova de Lisboa, UNL 2829-516 Caparica, Portugal [email protected]

UNIDEMI, Mechanical and Industrial Eng. Department Faculdade de Ciências e Tecnologia, FCT, Universidade Nova de Lisboa, UNL 2829-516 Caparica, Portugal [email protected]

Abstract — In this paper a model for an integrated application of Lean Management and Value Management in manufacturing processes is proposed. Its purpose is to reduce some gaps that have been pointed out to Lean Management, namely, lack of ability to understand customer value, potentially negative impact on innovation capability and inability to eliminate waste in small processes. To do so, concepts from both management approaches were integrated as well as some of their most relevant tools, namely, Value Stream Mapping and Function Analysis. The implementation test done to the proposed model indicates that it can improve the understanding of customer value allowing waste to be highlighted and eliminated. The paper briefly reviews both Lean and Value Managements concepts as well as the major tools that were included in the model. The model is then exposed and discussed, the test implementation of the model is briefly displayed and the main conclusions exposed. Keywords - Lean Management; Value Management; Functional analysis; FAST diagram; Value Stream Mapping

I.

INTRODUCTION

Alongside few other management approaches, Lean Management has been recognized as one of the most efficient and effective global operation strategies [1-2]. It is a way to do more and more with less and less, and does so by continuously eliminating “muda” (Japanese word for waste). Despite its general acceptance and usage, some of its gaps have been pointed out throughout its development. Those gaps include the lack of ability to understand customer value [2] and its potentially negative impact on innovation capability [3]. Also, the use of classical Lean Management tools, namely of value stream mapping, can result in overlooking major waste that occurs in small processes [4]. The solution to reduce these gaps can be the integration of noon classical Lean tools to highlight and eliminate such waste. Value Management, can be seen as a management approach, particularly dedicated to motivating people, developing skills and promoting synergies and innovation, with the aim of maximizing the overall performance of an organization [5]. In its core are two essential concepts, value and function, that impact on every notion or tool within its scope [6]. Through these concepts, Value Management´s functional analysis can be applied to products or services, promoting innovation and attempting to present the consumer

with the highest value possible. Nowadays, in spite of its decades of existence, Value Management seems to be struggling to survive amidst other management approaches [7]. Unmindful of the referred criticism, Lean Management has been and continues to evolve, and other approaches can contribute to this development without contradicting its core objective, to provide customer value [2]. Value Management, regardless of its current standing, seems to have, in its scope, concepts and tools that can fill in the referred gaps in Lean Management. In this paper we propose that the Value Management´s definition of value is applied in Lean manufacturing processes in order to promote a clearer understanding of value and waste. Also, the Value Management´s functional view of products and services is to have an impact on the innovation capability of improvement proposals. Finally, the combined usage of value stream mapping and Function Analysis System Technique (FAST) is intended to improve the ability to eliminate waste in small processes. This paper is organized as follows: first we briefly review the theoretical basis of Lean and Value Management in order to introduce concepts and tools that are presented in the model; than the proposed model is introduced and discussed; finally, in the last two sections, a case study is briefly exposed and conclusions are presented. II.

BRIEF THEORECTIVAL REVIEW

A. Lean Management Concepts In the scope of Lean Management, activities which absorb resources but create no value are considered “muda”, more specifically, defects, overproduction, waiting, transport, inappropriate processing and unnecessary inventory or motion. These actions, when seen in a manufacturing context, can also be divided into two types, necessary but non-value adding and simply non-value adding activities. The first type is considered type one “muda” (Muda I) and represents activities that are wasteful but necessary under current operating procedures. The second one, type two “muda” (Muda II), includes activities that are pure waste and should be eliminated immediately and completely [8-9]. Lean´s five principles of reflection and implementation include specifying value, identifying the value stream, creating

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flow in the stream, letting the client pull the product and seeking perfection in the organization [8]. Value can only be defined by the customer; it is created by the producer and is meaningful only when expressed in terms of a specific product or service. So, Value is created when waste is removed and when new features, which are wanted by the client, are added to the product or service [2]. There are more than one hundred tools associated with Lean Management and more are proposed every day [10]. In this plethora of tools, one the most prominent is value stream mapping. Such notoriety comes from its ability to deal with almost all kinds of the previously described “muda”, and from being able to compile, analyse and present a great deal of information in a short period of time [9,11]. Value stream mapping consists mainly in a map of the process activities that occur in the value stream of a product or service and intends to highlight and reduce the waste existing in that same value stream. Initially, it involves a preliminary analysis of the process undertaken, followed by a detailed recording of all the resources required in each process. This first step results in a map of the current state of the value stream, called current state value stream map. Once the waste in the value stream is highlighted, efforts are focused on eliminating Muda II and developing proposals that seek sequence changes that reduce overall Muda I and Muda II. The changes are proposed through a new map that shows how the value stream would look if those changes were to be implemented. Such new map is usually called future state value stream map. B. Value Management Concepts In Value Management, as shown in Equation 1, value can be described as the relationship between the satisfaction of needs and the resources used in achieving that satisfaction. Value = Satisfaction of Needs / Use of Resources (1) Value is created whenever a company increases the satisfaction of needs or lowers the resources used to achieve the actual level of satisfaction. Also, in Value Management, all needs can be objectively described by certain functional requirements, i.e., functions. The extent in which these functions are performed can be accessed by the application of levels of evaluation criteria. Functions that directly affect the satisfaction of the need and concern attributes expected of the product, or performed by it, are called User Related Functions (URF) and internal functions of the product that enable the User Related Functions, and are usually not seen by the user, are called Product Related Functions. It is common to express functions by the use of an active verb and a measurable noun [5]. Value is therefore associated with the performance of functions, evaluated through the criterion chose, and the amount of resources used to achieve such performance. Functional analysis is the method in which these concepts are implemented. Historically, it has been argued to be the only characteristic of Value Management that distinguishes it from other management philosophies and approaches [6]. Functional analysis is performed through five steps. First the functions are identified and listed, afterwards they are organized, characterized and set in a hierarchical and weight order and, finally, an evaluation of their actual and expected performance is made [5]. The FAST diagram is one of the most commonly

used tools during a function analysis study. It builds upon critical path and work breakdown structure methods to organize functions logically in a diagram. There are two main types of FAST diagrams, the technically-oriented and the customer-oriented one. The first is more suited to study existing products or services and the second one to help in their development process [12]. Fig. 1 shows an example of a technically-oriented FAST.

Figure 1 – Example of Technically-oriented FAST

The diagram is read, from left to right and from function to function, asking the question “How?” and from right to left asking “Why?”. Different kinds of functions can be added to the diagram to illustrate the scope of the problem under study. This tool is used to organize the functional requirements of the consumer in order to better understand his needs and to take into account the relationship between different needs he might have. FAST elicits customer requirements and should not be considered an end product or result, but rather a beginning [13]. III.

PROPOSED LEAN VALUE MANUFACTURING DESIGN PROCESS MODEL

A. Value Stream Mapping The proposed model is to be applied in manufacturing processes. It includes the concepts and tools previously discussed and should be implemented as shown in Fig. 2. After deciding which process is to be studied, the implementation starts with the use of value stream mapping. Initially, the client of the process should be defined. It can represent another organization or plant in the value stream of the product and will be referred to as external client. In this stage, as is usually done in value stream mapping applications, all the steps of the value stream should be described, as well as the activities that occur in those steps. The activities should be labelled with the involved resources, in terms of time, labour, machines, or other. From this stage should result the elimination of Muda I and Muda II that occur in, for example, unnecessary waiting time and movement or inappropriate processing.

Figure 2 – Lean Value Manufacturing Design Process Model

The waste that is supposed to be eliminated in this stage concerns the connections between steps of the value stream, i.e., systemic “muda” designated by S Muda. If improvement is possible, a future state value stream map is to be made and changes should be implemented before the study continues to the analysis of the value created in the sub processes or steps of the value stream. B. Functional Analysis in the Sub Process When this future state map becomes the current state of the value stream and all activities in its steps are identified and labelled, the study of each sub process is started. All steps are to be studied in the same manner. First the client of the sub process, usually the next step or steps in the value stream, should be defined. It will be referred to as internal client. Next, like in the first four stages of classic functional analysis, the functions are identified, organized, characterized and set in a hierarchical and weight order. To identify the functions needed by the external client, internal client and organization, the FAST diagram should be used by a team with profound knowledge of the sub process. The first question to be answered is “what must the sub process do for the external client?”, and the answer is to be set as the External Client Function (ECF). In this stage, other customer requirements may appear. Those requirements, usually related with quality or service characteristics that are not the main purpose of the sub process but represent minimum conditions without which the client would not consider making business with the organization, should appear on the upper right corner of the FAST diagram as Other External Client Functions. Next, the question to be answered is “How can the External Client Function be satisfied?” and the answer should represent the User Related Function of the sub process as, for each sub process, the way to satisfy the external client should mainly consist in satisfying the needs of the internal client. Subsequently the Process Related Functions (not product related because the application regards processes and not products) are defined when the rules of FAST construction lead the team to ask how the User Related Functions are satisfied. Finally, in order to complete this diagram, the organizations wishes or internal requirements, should also be attended. This Organization Related Functions are to be set on the upper left corner of the diagram and represent management strategic goals and process cost drivers.

Next, goals should be set to all functions present as well as a hierarchical chain of the functions. It is advisable to set goals that can be related to one another, for example, in terms of resources or any other unit that can be compared. Examples of ways to set the hierarchical chain can be found in [12]. C. User Related and External Client Functions Supply Analysis The following step in this study intends to measure the performance of the External Client Function and the User Related Functions of the sub process. In this stage, a performance criterion of acceptance of the sub process is set and its current state is compared with the criterion. If these functions are not being supplied to the customer within the levels expected, the organization can decide whether to initiate a value analysis study (guidelines can be seen in [5] and [12]) to redevelop the sub process or, if the organization considers that the levels of satisfaction are acceptable, even if they are not completely achieved, it can choose to proceed with this study. The decision can be made upon the assertion of whether the User Related Functions are being fulfilled or not, for example, if a casting station is producing bellow the objectives set but its User Related Functions are being fulfilled the right way, it may be more beneficial to continue the study and try to make productivity grow, than to redevelop the entire sub process. D. Sub Process Muda II Analysis Considering Equation (1), value is created when used resources are reduced and the same level of satisfaction of needs is achieved. Also as seen before, in the scope of Lean Management, an activity that does not add value is considered waste. Therefore, if any activity does not contribute to the satisfaction of one of the Process Related Functions (that makes possible the fulfilment of the User Related Functions and of the client´s needs) than it does not add value to the internal client and must be considered “muda”. The activities should be labelled as Muda I or Muda II whether they are necessary under current operating procedures or not, respectively. Table 1 shows an example of how to assess whether the activities are “muda”. In the first column all the activities performed in the sub process are placed and, on the first row, the Process Related Functions are presented. The team participating on the study

Current satisfaction levels (S ) are set and multiplied by the weight of each function (W ) and the sum of these levels of satisfaction is divided by the total amount of resources spent. To compare the value created, the same method is used after changes in the sub process are made. After this last stage, the team should go back to seeing if the External Client Function and User Related Functions are properly supplied and repeat the steps that come after it.

Table 1 - Example of table to allocate activities

IV. should analyse all the activities and decide to which function or type of “muda” each one contributes. The resources consumed by each activity should populate the table and they should all be relative to the same time period, e.g. a day or a shift. When the distribution is complete, all activities in the Muda II column are to be eliminated from the sub process, and the others improved. E. Sub Process Muda I and Functional Muda (F Muda) Analysis With all Muda II activities eliminated, value can still be enhanced by approximating the fulfilment of the Other External Client Functions and Organization Related Functions to the goals set, as their performance impacts both on the satisfaction of the User Related Functions and on the amount of resources used. To decide on which function to act first, their potential to create value as to be analysed. First, the direct cost of the functions in the sub process as to be measured and then their indirect cost as well, i.e., the amount of resources that are consumed due to lack of achievement of the goals set. To measure the direct cost of the Other External Client Functions and Organization Related Functions, the activities that were placed in the Muda I column on Table 1 should be redistributed to these functions. To do so, new columns, one for each Organization Related Function or Other External Client Function, must be added to the table and the team must ask itself, again, to which function the activities contribute. Considering that these activities do not create value but are important to satisfy one function, they will be called “Functional Muda” (F Muda). F Muda represents activities that can be absolutely necessary but in an ideal state should not be present. Next, the current distance to the total fulfilment of the objectives of each function is analysed. For example, if a company wishes to have quality levels of one hundred per cent and produces five defective pieces per day, than the resources invested in producing these pieces represent the indirect cost of that function. Adding these two types of costs, and taking into account the functions hierarchy and the impact that a function might have on the remaining ones, gives out an indicator of its potential to create value. After knowing on which function to act, proposals can be made and implemented. To measure improvements in the total value offered, the last step of functional analysis, evaluation of the functions, must be performed. Equation 2 shows how to calculate the total value offered. Value = ∑(

×

) / Total Resources Used

(2)

MODEL IMPLEMENTATION TEST RESULTS

An implementation of the exposed model occurred in a car parts supplier´s value stream. The sub process chose was a production cell with three assigned workers that was producing bellow expected levels. In the FAST diagram, the External Client Function and the User Related Function of the cell were defined as “supply parts” and “execute production schedule”, respectively. The Process Related Functions defined were “assembly components” and “prepare materials” for both machine and personnel. Five Organization Related Functions and one Other External Client Function were also placed on the FAST. The Organization Related Functions were defined as “reduce defects” that need reprocessing; “level cycle time” of workers and “reduce production breaks” caused by equipment failure, shortage of materials or occupational health and safety incidents. The External Client Function was set as “supply good components”, as in without defects, originated in the assembly cell, when delivered to the external client. Next, goals for each function were defined. For the User Related Function “execute production schedule”, the goal was obviously the fulfillment of the production schedule, around eighteen hundred pieces per shift. For the Organization Related Functions, goals were set by considering how their indicators would be if the assembly cell was running in an ideal state, for example, for the function “reduce defects” the goal was defined as zero defects per shift. Afterwards the functions weight was set by placing them in a hierarchical order that considered their significance to the organization. A total of thirty three activities occur in an assembly cell shift. Their consumption of workers time was recorded and placed on a table like the one exemplified on Table 1. After the Muda II activities were eliminated, the activities remaining in the Muda I column were redistributed to new columns in the table, one for each Organization Related Function and Other External Client Function. In order to be assigned to one function alone, some activities were separated into smaller elements, which resulted in a total of forty activities. The allocation of activities showed the consumption of resources per type of function and the remaining Muda I in the assembly cell, as exposed on Table 2. Table 1 - Consumption of resources per type of function and Muda I

This numbers showed that only fifty four per cent of the resources are used in creating value, as they are applied in activities that contribute to Process Related Functions. It was also clear that some fifteen per cent of the resources were used in what was considered F Muda activities, as they create no value but contribute to the fulfillment of one of the functions of the process. The sum of the activities time that lay in each functions column was considered their direct cost. To assess their indirect cost, their current distance to the goals set was measured. For example, regarding the function “reduce production breaks” related to shortage of materials, historic production data showed that twenty minutes per worker per shift were lost due to this kind of breaks. This value represents the indirect cost of that function. The adding of both direct and indirect costs of each function and the multiplication of this sum by the weight that was set in the functions hierarchy, gave out an indicator of each functions potential to create value. The current amount of value offered and the costs of each Organization Related Function and Other External Client Function were calculated and analyzed and it was concluded that the function related with the levelling of the cycle times had a large potential to create value. Therefore, a proposal to improve the performance of this function was developed. Its implementation will lead to significant improvement in the performance of the Organization Related Functions and User Related Function. It will also considerably enhance the value offered. The implementation concluded that the referred concepts and tools can be integrated without conflicting with one another and that the integration will provide Lean practitioners with a better understanding of customer value, as well as help them in their quest to eliminate “muda” in small processes. V.

MAIN CONCLUSION

This paper proposes an integration of Value Management´s concepts and tools in the scope of Lean Management, to be used in manufacturing processes. The model´s expected contribution is a clearer understanding of “muda” and value creation in manufacturing processes. This can be achieved through the use of the Value Management´s definition of value as well as through the use of value stream mapping, functional analysis and FAST. The proposed model has been tested in a car industry company and has achieved some promising results

regarding the definition of customer value and functional requirements, elimination of different types of “muda” and enhancement of value offered in manufacturing processes. The need to validate the proposed model asks for further discussion and new implementations. Finally, we refer that this paper presents only a part of an ongoing study to propose a value based model that can also be used in the development of new products and services with contributions from both Lean and Value Management. REFERENCES [1]

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