Delft University of Technology
FACULTY MECHANICAL, MARITIME AND MATERIALS ENGINEERING
Department Maritime and Transport Technology Mekelweg 2 2628 CD Delft the Netherlands Phone +31 (0)15-2782889 Fax +31 (0)15-2781397 www.mtt.tudelft.nl
This report consists of 31 pages. It may only be reproduced literally and as a whole. For commercial purposes only with written authorization of Delft University of Technology. Requests for consult are only taken into consideration under the condition that the applicant denies all legal rights on liabilities concerning the contents of
Specialization: Production Engineering and Logistics Report number: 2015.TEL.7919
Title: The compatibility of Lean
Manufacturing and Agile Manufacturing in a supply chain
Author: K. Aberkan
Title (in Dutch) De compatibiliteit tussen Lean Manufacturing en Agile Manufacturing in een supply chain
Assignment: literature Confidential: no
Initiator (university): Dr.ir. H.P.M Veeke Supervisor: Dr.ir. H.P.M Veeke
Delft University of Technology
FACULTY OF MECHANICAL, MARITIME AND MATERIALS ENGINEERING
Department of Marine and Transport Technology Mekelweg 2 2628 CD Delft the Netherlands Phone +31 (0)15-2782889 Fax +31 (0)15-2781397 www.mtt.tudelft.nl
Student: K. Aberkan Assignment type: Literature Supervisor (TUD): H.P.M Veeke (TU Delft) Creditpoints (EC): 10
Specialization: PEL
Report number: 2015.TL.7919 Confidential: No
Subject: The compatibility of Lean Manufacturing and Agile Manufacturing in a supply chain
A well-known paradigm, known as Lean Manufacturing which arose in the early 20th century, had a large impact on the industries. Many companies applied the principles of Lean to become more aware of the value stream and elimination of waste to obtain a more efficient and cost-effective process. Also Lean is effective in a stable environment where the customer demand doesn’t change turbulently. In the 21st century, apart from Lean, many companies apply the principles of Agile Manufacturing as a reaction to the volatile market. As the market becomes unpredictable, a flexible process is necessary to counter this problem. Since both paradigms have proven to be very effective, can the two, Lean and Agile, co-exist in a supply chain to acquire a superior position in the market?
To answer this question, the two paradigms will be clearly defined at first and the compatibility of the two will be analyzed.
The report should comply with the guidelines of the section. Details can be found on the website.
The professor,
Summary
The purpose of this literature assignment is to obtain a good understanding about the two well-known paradigms Lean and Agility and the relation between them.
In the 20th century, a revolutionary philosophy named Lean Manufacturing was developed by
Taiichi Ohno and proved very successful. Chapter 2 describes the philosophy behind Lean Manufacturing with the purpose of gaining a comprehension of this paradigm.
For an organization to be Lean several principles must be complied with which are value, value stream, flow, pull and perfection. Value must be considered from the perspective of the customer as the value stream is a series of activities in order to create this value which the customer is willing to pay for. When the demand is stable, which should be based on pull, the organization may be capable of attaining smooth flow by synchronizing the demand with the production process. Perfection can then be approached whenever the Lean
organization continuously improves the process. To work according to the principles several methods are used known as JIT, Kaizen, Poke Yoke and Jidoka.
Since the demand becomes turbulent and volatile in the 21st century it becomes more and
more difficult for companies to survive. As a result of these changing demands, companies seek for feasibility in producing in volume and variety in order to conquer the market. Chapter 3 outlines the general concept of the Agile paradigm which includes the basic elements and characteristics an agile organization should at least have.
It is critical to the organization’s survival to be able to respond to the market demand
accordingly. In order to do so flexibility and quick responsiveness are necessary to be able to provide the required products to the (end-) customer when the market demand changes volatile.
The fourth chapter describes the relation and combination of Lean and Agile, also known as Leagile. There are three general positions in which the paradigms can be viewed. They can be seen as distinct concepts that cannot co-exist, mutually supportive and Lean as a precursor to Agility. Different characteristics are compared and rated. The use of market knowledge, value stream and lead time compression is as much as important for Lean as for Agile organizations. For a Lean organization it is important to eliminate muda and to have smooth demand where as an Agile organization puts its priority in rapid reconfiguration and robustness. Lead time and quality is central to both paradigms while service takes a higher position in an Agile organization and cost in an Lean organization.
In a Leagile supply chain Lean and Agility are divided by the decoupling point. This point is also a strategic buffer between smooth production output (upstream) and the fluctuating customer demand (downstream) and should be positioned depending on the longest lead-time that the end-customer is willing to accept and at which variability in product demand dominates. Producing items at a generic level that eventually can be embodied in a variety of end-products makes the system more flexible and makes forecasting on generic level more convenient. This Leagile strategy in the total supply chain can therefore lead to a superior position in the market.
Contents
Summary ... 3
1. Introduction ... 5
2. Lean Manufacturing ... 6
2.1 Systems approach of Lean ... 6
2.2 Principles of Lean ... 7
2.3 Different aspects of Lean ... 8
2.4 The aspects from a DSA point of view ... 12
2.5 The Lean supply chain ... 16
3. Agile Manufacturing ... 17
3.1 Systems approach of Agility ... 18
3.2 Basic elements for Agile Manufacturing Strategy ... 18
3.3 Features of Agility ... 21
3.4 Characteristics in the Agile supply chain ... 22
3.5 Supply chain management in Agile Manufacturing ... 23
4. Lean and Agility: Leagility ... 25
4.1 General positions with respect to Lean and Agile ... 25
4.2 Comparison of characteristics of Lean and Agile ... 26
4.3 The decoupling point ... 27
5. Conclusion ... 29
1. Introduction
The very well-known paradigm 'Lean' had its birth in japan within Toyota in the 1940s and was developed by the Toyota Executive Taiichi Ohno. Lean Manufacturing is a management philosophy which is based on attaining maximum value for the end customer with as little waste (muda) as possible in the process.
The Toyota Production System was based around the desire to produce in a continuous flow which did not rely on long production runs to be efficient. It was based around the
recognition that only a small fraction of the total time and effort to process a product added value to the end customer (Melton, 2005).
After World War II, Japan was confined in its capability in gaining resources of all kinds, such as land, capital, workforce etc. Because of this, Toyota and other manufacturers developed techniques to manage their business in a very lean environment. These techniques
developed into what is now known as Lean Manufacturing. In the early 80's some Japanese manufacturers built plants in the United States and operated these plants with the principles of Lean.
However, the manufacturing industry have been experiencing many paradigm shifts in the 20th century. These paradigm shifts started with the shift from 'craftsmanship' to the well-known Henry Ford's 'mass production' in the early 1900, to 'Lean Manufacturing' and finally 'Agile Manufacturing'.
It becomes more and more difficult for the manufacturing industries to survive since the markets are becoming more turbulent and volatile. Because of the varying customer needs, changes in the business environment have to occur which also lead to uncertainty in decision making. To be able to handle this problem, flexibility is needed in the supply chain. A supply chain that can quickly adapt to the market changes is agile in nature.
As can be found in the literature ‘Lean’ works best in high volume, low variety and a predictable environment while ‘Agility’ is needed in a less predictable environment, where demand is volatile and the requirement for variety is high (Christopher, 2000).
The goal of this report is to give a good understanding about the two paradigms ‘Lean Manufacturing’ and ‘Agile Manufacturing’. This research will present the possibility concerning the co-existence of the two paradigms in a supply chain.
The main research question to be answered in this study will be:
Can the two paradigms ‘Lean’ and ‘Agile’ co-exist in a supply chain to have a higher competitive edge in the volatile marketplace? And if so, how?
To get a better understanding about the two main subjects, chapter 2 will be dedicated to the philosophy behind Lean Manufacturing and the third chapter will be about Agility in general. Chapter 4 describes the two combined and how the two relate to each other. At last the conclusion of the assignment will be given.
2. Lean Manufacturing
To have a clearer understanding about Lean, it is necessary where Lean actually comes from and how it developed.
In the early 20th century, before Lean Manufacturing was developed, the western world
adopted the philosophy of mass production, developed by Henry Ford. With the assembly line technique that he established, he revolutionized the automotive industry which shifted from craftsmanship to mass production which was way more efficient. In his Ford Motor Company in Highland Park he used conveyor belt assembly lines which increased the productivity. No skilled workers were needed and simple routine tasks were performed. At the end of the assembly line a quality control team looked for defects to undo those without looking at the cause of the defects. In the mid-20th century, another revolutionary philosophy
was developed by Taiichi Ohno, called Lean Manufacturing.
In 1990 James P. Womack wrote a book, named “The machine that changed the world”, which describes the history and the comparison of the European, American and Japanese auto industries i.e. Mass Production vs Lean Manufacturing.
The essence of the production philosophy “Lean” is maximizing customer value while minimizing waste. While in mass production facilities a lot of waste and large inventories were noticed, Lean enterprises concentrated on reducing these non-value added factors as far as possible. Value is therefore any action that the customer is willing to pay for. By understanding the customer value, the lean organization can focus its processes to enlarge this value. The goal that eventually should be achieved with Lean is that the organization can provide perfect value through a process with zero waste. Lean Manufacturing states that all non-value adding activities, or muda, must be eliminated.
The Lean supply chain will be as flexible as possible but flexibility is not a prerequisite to be Lean (Naim & Gosling, 2011)
To attain this goal, the flow of products and services through the entire value stream from the beginning till the end customer, should be optimized.
Instead of eliminating waste only at isolated points, elimination of waste throughout the entire value stream makes processes that need less human labor, less inventory, less time and less space to make products with higher quality.
2.1 Systems approach of Lean
The most important goal of Lean is eventually “making money”. The reduction of waste must be realized for cost reduction and improvement of the productivity.
The systematic model of “Lean” is depicted in the blackbox below:
Lean Production Requirements: Elimination of waste High Quality Just-in-Time Delivery Heijunka Performance: Eliminated waste Just-in-Time Delivered High Quality
Raw materials End products
A brief explanation to this drawing:
The blackbox model displays the general Lean process.
The thin arrows show the information flow while the thick arrows indicate the material flow of the process. As can be seen in the input, raw materials enter the process to be
transformed into the output, which is the end-product.
The requirement flow is the goal that should be achieved by the process which is the elimination of waste, Just-in-Time Delivery, high quality and Heijunka (production-leveling). The performance flow is determined to what extent these requirements have been reached and how well the operation process has been operating.
As can be seen from the blackbox, the process should eventually achieve the goal of
elimination of waste, producing high quality products and deliver on time to have a lucrative system. But to have a Lean system, several principles have to be complied with which are very important for having a Lean organization.
2.2 Principles of Lean
According to James P. Womack, a Lean organization must follow the principles of Lean. These principles are described in his book “Lean thinking” as:
- Value
- The Value Stream - Flow
- Pull - Perfection
2.2.1 Value
Value is something that can only be defined by the end customer. Hence defining value is the essential starting point for a Lean organization. This defined value is significant when expressed in terms of a product, good or service offered that meets the customer’s demand or need at a specific price. This might mean for the firm to redefine the role of the technical experts and the consideration of where in the world to create value.
2.2.2 The Value Stream
The set of all the particular activities needed to eventually obtain the end-product is called the value stream. The three critical management tasks the product is required to go through is:
- Problem-solving task: from concept to detailed design and engineering to production launch
- Information management task: from order-taking through detailed scheduling to delivery
- Physical transformation task: from raw materials to a finished product
When doing an analysis of the value stream, mainly three types of actions appear along the value stream:
1. Actions that actually create value.
2. Actions that do not create value but are inevitable and are necessary with the present-days’ technologies.
2.2.3 Flow
As soon as the value has been specified, the value stream is mapped and the obvious waste has been eliminated, the following step would be creating a continuous flow of the value-adding steps in the total process. To obtain a continuous flow, the focus should be on the product and its needs rather than the equipment or the organization. From the moment that the process starts up until the delivery, the process must not be stopped.
The takt time controlled processes, which determines the rhythm of the production process, eliminate intermediate inventories and should precisely be synchronized with the demand. Hence takt time is determined by dividing the total available production time by demand. A well-known term in Lean is Just-in-Time which is perceived by Taiichi Ohno as a method for facilitating smooth flow. But there has to be a leveled schedule (heijunka) because if production volumes and mix vary wildly day by day, it is almost impossible to establish a JIT system.
2.2.4 Pull
A ‘push’ system produces as much as it can to fill a warehouse; rather than pushing
products, which even may be unwanted by the customer, a ‘pull’ system is adopted in Lean. Pull means that upstream should not produce “value” until downstream (the customer) requests it and link all the production chain (even with suppliers) in such a way that materials are not released and activities are not done until they are needed (Duque & Cadavid, 2007).
Because of the growing uncertainty, forecasting becomes more and more difficult to do. Hence pull models are used in a Lean environment. In literature can be found that Pull production is also defined as “one that explicitly limits the amount of work in process that can be in the system. By default, this implies that a push production system is one that has no explicit limit on the amount of work in process that can be in the system” (Hopp & Spearman, 2004)
2.2.5 Perfection
If the first four principles have been complied with, then there is already a huge amount of waste prevented from materializing within the process. With the help and support of the employees, the work can be continuously improved to strive towards perfection. The aim is zero waste and the ability to deliver value to the customer. Every employee should be
involved in implementing Lean tools such as Kaizen to drive continuous improvement of each and every aspect of the process.
2.3 Different aspects in Lean
In this paragraph different aspects will be outlined which are necessary to comply with the principles of having a Lean organization.
These aspects, found in literature, are:
-
Just-in-Time and Kanban-
Kaizen-
Poka Yoke and jidoka2.3.1 Just-in-time and Kanban
Having the right items of the right quality and quantity in the right place and at the right time is what Just-in-Time production means, whether the ‘customer’ is the final purchaser or another process further along the production line. Tackling waste is an overall quality
improvement activity that should be performed to increase the efficiency. JIT production is an underlying methodology that allows addressing specific waste. Waste can best be defined as any activity that does not add value to the product and thus the customer is not willing to pay for (Melton, 2005).
There are seven types of waste identified by Toyota’s Chief Engineer Taiichi Ohno. Also known as Ohno’s seven muda (Hicks, 2007):
1. Transportation: this does not add any value to the product which the customer is willing to pay for and as well stands the risk of being damaged or delayed or maybe even lost. This will affect the productivity and quality issue. In general, transport should be minimized as it adds time to the process when no value is added to the product.
2. Inventory: excess inventory prevents quick identification of problems and tends to increase lead time. This requires additional handling and space.
3. Motion: needless movement of people who operate the manufacturing facility, which is not economical.
4. Waiting: whenever goods are not being processed, it means that the goods are “waiting” to be processed eventually. The waste of waiting is directly related to flow and happens when time is not being used effectively. This means that the lead time will suffer from this with the consequence of diminishing customer satisfaction (Wahab, Mukhtar, & Sulaiman, 2013).
5. Over-processing: any kind of extra operations done on a piece than is required by the customer.
6. Overproduction: when operations continue while they should have stopped, it will result in excess of products and inventory.
7. Defects: These are the errors during the process which require additional work or rework. Which results in extra labor costs.
Jeffrey Liker, the author of The Toyota Way added another type of waste to this list which is known as “unused employee creativity” (Wahab et al., 2013).
There are three fundamental objectives for JIT (Cheng & Podolsky, 1996): 1. Increasing the efficiency
2. Reduction of the level of wasted effort, time and material 3. Increasing the organizations ability to compete with rival firms.
Since JIT is based on pull, the Kanban system is used in a JIT production environment to meet these objectives. Kanban is a Japanese word which means “visible record “ or “visible part” (Rahman, Sharif, & Esa, 2013), but in a production environment it refers to a card or a tag which contains information about the withdrawal, the transport and the product.
The Kanban system is an information system that controls the production quantities in every process.
A production line can be broken down into segments which contains a fixed number of Kanban cards at every segment. A Kanban is sent from employees of one process to the employees of the preceding process. As a result many processes are connected to each other. Until a Kanban indicates that a part is needed by the downstream (internal) customer, only then the production of a part will start.
On account of the limited number of Kanbans, the inventory can be kept to a certain level, which should be kept to a minimum.
This Kanban system knows two kinds of Kanban cards which are mainly used (Matzka, Di Mascolo, & Furmans, 2009):
- Withdrawal Kanban: this type of Kanban defines the quantity that the following segment takes from the previous one.
- Production Kanban: This type of Kanban indicates the quantity and the type of products the next process should produce.
As stated earlier, production leveling is necessary in a JIT production system to reduce the
mura (unevenness) and eventually reduce muda (waste) to have a smooth flow. This is easy to achieve when the demand is constant but becomes more difficult when the demand fluctuates.
2.3.2 Kaizen
Kaizen stands for ‘continuous improvement’ or ‘change for the better’ and involves all
workers in a company to focus on process improvements. The strive to continually improve is significant to Lean Manufacturing. Although Kaizen is often confused with Lean itself, Kaizen is not Lean but rather a part of Lean (Ortiz, 2010).
Masaaki Imai states in his book GembaKaizen the difference between innovation and Kaizen as follows (Imai, 1997):
“Innovation is dramatic, a real attention getter. Kaizen on the other hand, is often undramatic and subtle. But innovation is one-shot, and its results are often problematic, while the kaizen process, based on common sense and low-cost approaches assures incremental progress that pays off in the long run. Kaizen is also a low risk approach.”
What is fundamental in Kaizen is that people who are closest to the labor have more
knowledge about the work and have to be involved in making the process more efficient and effective. The first goal of Kaizen is therefore the concurrent achievement of excellence in
quality, cost and delivery (Moore, 1986):
- Quality: stands for the quality of the processes, the intermediate products and finished products. Poor quality may never continue to the next process. The key elements for supporting the qualities are TQC (Total Quality control) and TQM (Total Quality Management).
- Cost: the overall cost which includes cost of designing, producing, selling and servicing.
- Delivery: delivery of the products on time
To support and keep the customers satisfied these conditions have to be met. When a problem occurs the root cause has to be found and addressed in order not to have the same problem occurring in the future. This is done by using a simple 5 Whys method, where the problem solver is asking himself “why” that specific problem happened and then asks “why” again up until 5 times. Whenever the problem is truly solved, the management must
establish or revise the standards so that the people will consistently work according those standards to prevent re-occurrence of the problem.
Kaizen has three major activities: 1. 5S
2. Standardization 3. Elimination of muda
5S
5S is a method developed by Hiroyuki Hirano for organizing, cleaning up and standardizing the workplace. Carelessness and lack of orderliness on the work floor can lead to irritations and even accidents. By using this method items are easily located and a better visibility of the problems are displayed so that the employees can act proactively (Knechtges, Bell, & Nagy, 2013). The 5S stands for:
- Seiri/Sorting: sort all the parts needed and eliminate unnecessary ones. - Seiton/Straightening: organize the workstation. Everything should have a fixed
position so that the workers can find the needed item easily. - Seiso/Sweeping: workspace should be kept clean and organized.
o Clean to inspect o Inspect to detect
o Detect to correct (Moore, 1986)
- Seiketsu/standardizing: securing the first 3S steps. The workstations should be consistent and standardized.
- Shitsuke/sustaining: maintain and review of the previous 4S’s. The 5S process should be ongoing to continue the improvement.
Standardization
Standardization indicates the best, easiest and safest practice and forms the baseline for continuous improvement. It is a set of work procedures that set up the most efficient and safest methods and sequences for each process and worker (Ortiz, 2010). Every time a standard is improved, the new standard becomes the new baseline for further improvement and so forth. These improvements is a continual process. According to Imai standards provide:
- A way to measure performance
- A basis for maintenance and improvement objectives - Basis for training
- A basis for audits and diagnosis
- A means of preventing recurring errors and variability
2.3.3 Poka Yoke and Jidoka
Poka yoke is a Japanese term and most translated as “mistake-proofing” which stands for mistake proofing a design or process. Poka means “inadvertent errors” and yoke means “avoid”. Thus it can be defined as “the avoidance of inadvertent errors”. The basis for poka yoke is that defects appear because of the errors made by workers. In order to prevent defects to occur, a mechanism needs to be in place to warn the worker about the potential error that might appear and eliminate the error as early as possible in the process. Process mapping in this case is important and helps in identifying opportunities to errors for mistake proofing (Van Scyoc, 2008). Mistake-proofing can be divided in several categories, namely mistake prevention, mistake detection, preventing the influence of mistakes and mistake proofing in the work environment (Tsuda, 1993).
Mistake prevention keeps mistakes from happening while mistake detection only alerts the workers for a mistake that has occurred. Often mistakes that are corrected early do not give rise to defects. Preventing the influence of mistakes signifies that the results of the error are diminished. Mistake prevention in the work environment is closely related to 5S and means that confusion and uncertainties should be reduced.
Jidoka refers to “automation with a human touch”. People as well as the installations have the autonomy of stopping the process if a problem is detected. The process may be stopped by a machine using sensors or by an employee pulling on a cord which is known as “andon”. The basic steps of Jidoka are (Grout & Toussaint, 2010):
1. Detect the problem 2. Stop the process
3. Restore the process to proper function 4. Investigate the root cause of the problem 5. Install countermeasures
The goal of Jidoka is simply producing without any defects. Generally speaking, stopping processes can be very costly, but according to Ohno this method ensures better performance in the long run.
Jidoka involves stopping the line in order to solve problems while poka yoke involves stopping the process to restore it to its proper funtioning or to get rid of the causes of defects. A variety of opinions about these two terms can be found in the literature that lead one to think that poka yoke is a subset of jidoka or vice versa (Grout & Toussaint, 2010).
2.4 The aspects from a DSA point of view
To have a clearer understanding of the different aspects in Lean a systematic approach is needed. In this paragraph The Delft Systems Approach (Veeke, Ottjes, & Lodewijks, 2008) is used in gaining the systematic insight of Lean.
In paragraph 2.1 the highest aggregation layer has been reproduced known as the blackbox. By opening this “blackbox” we can zoom in to a lower aggregation layer which gives the model below:
Just-in-Time
Operational
System
Standards Results Requirements: Elimination of waste High Quality Just-in-Time Delivery Heijunka Performance: Eliminated waste High Quality Just-in-Time Delivered (raw)materials End-productFigure 2: JIT as a control function
JIT serves as a “control function” for the production in a Lean environment. The input for JIT as a control function is the requirement for the elimination of waste as well as the demand of the customer etc. From these requirements standards are defined so that the operation can work according to these standards to eventually reach the goals. The standards can be defined as the lead-time, set-up time and the norms for the operations to operate efficiently, effectively and qualitatively.
This states implicitly the achievement of the three goals that should be realized.
As previously mentioned, Kanban is a method to “pull” the materials through the process to the customer by using Kanban cards. Hence Kanban plays an important role in the execution
of the process and is therefore placed in the “Operational System”. These cards give a signal to the production to either execute a process or that one is finished which gives a physical feedback to the previous section to refill new parts. The latter signal implicitly demands the production of the previous process.
Below, the Kanban method is depicted including the JIT control function.
Just-in-Time
Standards Results Requirements: elimination of waste High Quality Just-in-Time Delivery Heijunka Performance: Eliminated waste High Quality Just-in-Time Delivered (raw)materials End-product Operational system Kanban Process execution Execute ExecutedFigure 3: JIT with Kanban
Kaizen can be seen as a function which continually improves the process by adjusting the standards which are defined in the control function. These adjustments should make the process more efficient and effective. This function is the same as the function control known in the Delft Systems Approach. Thus to depict Kaizen, we must zoom in the control function Just-in-Time. Standards Results Requirements: elimination of waste High Quality Just-in-Time Delivery Heijunka Performance: Eliminated waste Just-in Time Delivered
High Quality I
E
Standards Deviation Just-in-Time Kaizen Function controlFigure 4: JIT and Kaizen function model
If the results do not satisfy with the standards the deviation is analyzed and standards adapted.
The Initiating function (I) sets standards based on the requirements and may adapt standards based on the data from the Evaluating function (E).
The Evaluating function (E) compares the results with the standards to inform the deviations back to the initiating function to adjust these. This function also reflects the performance to the environment. The measurement or detection of a point of improvement takes place in the Evaluating function.
As can be seen in this model, the process is looping which leads to an incremental improvement of the total process which is Kaizen.
In order to avoid errors, poka yoke and jidoka are used by the workers to act proactively. If an error already occurred an intervention on the process is needed. This direct control of the process is known in the DSA as the “process control” function. Below the schematic view of jidoka and poka yoke is displayed:
Operational
System
Poka Yoke
Jidoka
(Raw) materials End product
Measurements Intervention Standards
Figure 5: Jidoka & Poka Yoke as process control
Based on the measurements taken from the process, an employee or machine can intervene if necessary. If a disturbance occurs in the input or in the throughput zone, the form of control used then is the feed forward. This ensures that the intervention should prevent the rise of a defect. If a defect occurred in the output zone, the process can be stopped and the problem should be solved in order not to have the same problems in the future. This form of control is called feedback. In the figure below, the detailed version of the process control is depicted: Measurements Input/Throughput Standards
C
ControlC
Measurements Ouput Feed-forward Feedback Intervene Process control Poka Yoke JidokaFigure 6: Detailed Jidoka & Poka Yoke model
The “C” stands for the comparison function and compares the measurements with the defined standards. Whenever there is deviation between those two, the comparison function
will either send a feed forward or feedback to the “control” function, based on the location of the disturbance.
The function “control”, based on the “feed forward” and “feedback”, ensures the intervention of a process if a disturbance occurs. This can take the form of stopping the process or
installation of countermeasures in order not to give rise to a defect further in the process. Now that all the aspects have been shown schematically, a total picture can be given by combining these figures.
Measurements Input/Throughput Standards C Control C Measurements Ouput Feed-forward Feedback Intervene Process control Poka Yoke Jidoka Results Requirements: elimination of waste High Quality Just-in-Time Delivery Heijunka Performance: Eliminated waste
Just-in Time Delivered
High Quality I E Standards Deviation Just-in-Time Kaizen Function control (raw) materials End product Operational system Kanban Process execution Execute Executed Blackbox Lean
Figure 7: Total Lean model with its aspects
2.5 The Lean supply chain
According to Womack the key competitive parts-supply system (in the automotive or any other manufacturing industry) is the way the assembler works with the suppliers, whether the supplier comes from inside or outside the company. The suppliers in a Lean supply chain are chosen on the basis of past relationships and a proven record of performance while in the mass production the suppliers are chosen on the basis of the lowest bidders.
In a Lean supply chain the supplier must share a substantial part of its information about costs and production techniques. The assembler and supplier are looking for ways to cut costs and improve quality in the supplier’s production process and in return, because of these exposures, the assembler must respect the supplier to make a reasonable profit. In contrast with mass production, in Lean the supply is continually declining prices over the life of a product and assumes that the price of the first year’s production is an approximate calculation of the supplier’s cost plus profit. Whenever both parties find ways to reduce cost together, they will share the profit. But if, for instance, the supplier comes up with an innovation that further reduces the cost, then that particular profit will remain for the supplier. Thus working according this system replaces a malicious circle of mistrust for a righteous circle of cooperation. Nevertheless, when a supplier falls short on quality or reliability then the assembler shifts a fraction of the business to another supplier for a given period of time which can have a tremendous effect on the profitability. Toyota and other companies have found that this form of punishment is highly effective in keeping everyone on their toes while sustaining a continuing relationship which is essential to the system (Womack, Jones, & Roos, 1990).
Whenever the components are produced by the suppliers, the components are delivered directly to the assembly line which happens at least several times a day without the inspection of the incoming parts. This procedure is in conformity with the JIT system.
3. Agile Manufacturing
Industrial environment has changed radically over the last 20 years. In this time period technology, market conditions, and customer demands have changed at high speed. The ability to adapt fast and accurately to changing conditions will play an important role to success in the future.
Aside from Lean Manufacturing, there is another management philosophy named Agile Manufacturing.
Dictionaries generally define agility as “the power of moving quickly and easily; nimbleness”. Agility is defined by Christopher as “Agility is a business-wide capability that embraces organizational structures, informational structures, information systems, logistics processes, and, in particular, mind-set”.
The aim of Agile Manufacturing is to create a firm that can produce in volume and simultaneously produce variety for market niches.
To reduce the cost of variety, agile companies try to combine the advantages of time compression with techniques. The objective is therefore to deliver small quantities of goods, which meet individual specifications, as fast as possible.
For a firm to become agile, a redesign of the processes and products may be necessary in order to meet the customers’ expectations for customization as well as responsiveness. Initially, it was thought that through automation, flexible manufacturing could be achieved, because automation would reduce set-up times and therefore respond more rapidly on changes in product or volume (Christopher, 2000).
Agility is not about improving efficiency or cutting costs, but it is about succeeding in upcoming competitive areas and winning profits and market share.
Agile Manufacturing is an operational strategy that aims on encouraging velocity and flexibility in a chain. A key aspect of an agile organization is flexibility.
These two characteristics, velocity and flexibility, form the fundamental differences between an Agile supply chain and a general one.
The velocity encompasses the ability of responding quickly to change in customer demands or requirements while the flexibility encompasses the ability to (re)configure quickly
accordingly (Ming, 2007).
For a general concept of Agile Manufacturing, the basic elements as well as the
characteristics/features will be outlined in the following paragraphs. At last the supply chain management in agile manufacturing will be described.
3.1 Systems approach of Agility
For an agile organization the most important factor is being able to respond quickly to changing demands. The systematic model of “Agility is depicted in the blackbox below:
Figure 8: Blackbox model Agility
A brief explanation to this drawing:
The blackbox model displays the general Agile process.
The thin arrows show the information flow while the thick arrows indicate the material flow of the process. As can be seen in the input, raw materials enter the process to be
transformed into the output, which is the end-product.
The requirement flow is the goal that should be achieved by the process which is the quick responsiveness, fast delivery and flexibility.
The performance flow is determined to what extent these requirements have been reached and how well the operation process has been operating.
Since the Agile paradigm does not contain any specific methods that can be described step-by-step, the blackbox will not be zoomed into. Although in the absence of specific methods in practicing Agile Manufacturing, there are basic elements and characteristics that an Agile organization should comply with. These will be discussed in the following paragraphs.
3.2 Basic elements for Agile Manufacturing Strategy
Since companies face a huge variety of particular situations it is considered very difficult, even impossible, to prescribe a step-by-step general method for developing manufacturing strategies. However, there are some basic elements on which the companies should base the development of their agile manufacturing strategies (Correâ, n.d.). These elements are:
- Flexibility and control
- Breaking barriers through customer-supplier negotiations - The Time-phased approach
- Achievement of proactivity - The replanning process
3.2.1 Flexibility and control
Since it is a given that change is a central concept for the manufacturing management of the future, manufacturing strategies must put the focus on change management.
Because of the broad definition of change and many facets, companies normally tend to have a certain level of “protection” against some types or levels of change. According to
Correâ unplanned change can be dealt with in two ways, which are flexibility and unplanned change control. This means avoiding being affected by the changes. Companies should therefore seek for the right balance between flexibility and control in order to manage unplanned change in Agile Manufacturing systems.
Flexibility
Flexibility is increasingly desirable in an agile environment but in order to achieve effective flexibility some level of baseline stability is needed. Change control mechanisms can be a useful resource for achieving this stability.
There are four types of flexibility defined in the literature which are product, mix, volume
and delivery.
1. Product flexibility is the ability to develop or modify products and process to the point where regular production can start.
2. Mix flexibility is the ability to produce a mix or change the mix within a given time period.
3. Volume flexibility is the ability to change the absolute level of output which the company can achieve for a given product mix
4. and delivery flexibility is the ability to change delivery dates effectively. In addition to these 4 types of flexibility, Correâ added a 5th type of flexibility, namely
“System robustness”. This can be defined as the ability to surmount unplanned changes in the process (such as machine breakdowns) or in the input side (such as faulty deliveries).
Unplanned change control
The different types of unplanned change control mechanisms are: - Monitoring/forecasting - Co-ordination/integration - Focusing/confining - Delegating/contracting - Hedging/substituting - Negotiating/advertising/promoting - Maintenance/update/training
3.2.2 Breaking barriers through customer-supplier negotiations
Breaking down organizational barriers is absolutely essential to be able to respond and adapt effectively to changes and is based on negotiations between functions on a “customer-supplier” basis. The basic assumption is that everyone in the organization has customers (internal or external) and therefore should serve the customers in the best possible way. The customer and the supplier have to negotiate and agree on a specific set of performance criteria. This set of performance criteria represents the “point of contact” and differs
between every two functions.
3.2.3 The Time-phased approach
The points the two functions have agreed upon are not related to a single point in time and should rather be time-phased. This means that the functions do not only agree upon the objectives but also on the path that the company has to go through in order to have a competitive position.
3.2.4 Achievement of proactivity
Proactivity can be realized when future possible scenarios are explicitly considered by the functions. The representatives and analysts of the different functions have to be informed about the development in their field of interest in order to develop these scenarios. The people in these functions, with the ability to negotiate and think up of scenarios, have to develop the so-called “contingency models”. Contingency models link, possible present and future, contingencies with the various points of contacts between the function and other interacting functions. The figure below illustrates the negotiation process.
Figure 9: Negotiation process for the operationalization of proactivity
3.2.5 The replanning process
The replanning process can be triggered by time and relevant events in order to prevent the company from delaying to important changes. The replanning process may also happen when it is considered by any function that something relevant has changed or may come to change. For example a sudden great change in import rates can be an incentive for the replanning process. The company can therefore realign their efforts for the new situation caused by the change.
3.3 Features of Agility
According to (Goldman, Nagel, & Preiss, 1995) there are essentially four basic features: - Products: Agility is centred on the customer-perceived value of products and aims to
decouple cost of production and lot sizes.
- Virtual organisation: the goal is to bring Agile products to market as fast as possible through co-operation by leveraging resources.
- Entrepreneurial: Agile manufacturers must know how to deal with change and uncertainty and convert this to growth.
- Knowledge-based: Agility embraces the decentralization of authority because of the future key factors which will be information and people. Therefore leveraging the value of human and information resources.
Gunasekaran states in his article that these features suggest ideals which are in contrast to the very basis of lean thinking. “The mass customization mindset, in contrast to lean thinking, demands synthesis of the great economies of mass production with individually customised goods and services” (Gunasekaran, McGaughey, & Wolstencroft, n.d.).
Mass production is achieved by economies of scale while mass customisation is achieved by economies of scope. The difference between these two lies in the volume and how the production takes place. Therefore, economies of scales means that low cost results from producing in high volume and low variety and economies of scope means that different products can be produced at low cost. Thus individual product volume are low but total product volume is high.
Figure 10: Agility and Lean Production
Above a “volume/variety” diagram is depicted that shows the difference between Agility and Lean production. Volume is the relative number of units sold in a given range and variety is the relative number of product offerings in a given range. As can be seen in the diagram Lean production applies the advantages of flow line to batch environments, which results in low cost, low throughput time and low inventories. The variety is low with respect to Agility. Therefore Agility can be placed in the category of a project or jobbing process types because of the high variety and lower volume.
3.4 Characteristics in the Agile supply chain
M. Christopher and Sharifi and Zang claim that a business organization is agile when the supply chain possesses a number of different characteristics.
These characteristics are:
Market sensitive
Virtual
Process Integration
Network based
Market Sensitive (Customer/marketing sensitivity)
Because of little direct feed-forward, which consists of data on actual customer
requirements, most organizations are tend to base their forecasts on past sales or shipments and turn these forecasts into inventory. Hence the organizations are rather forecast-driven than demand-driven. This can lead to an excessive amount of inventory. For an organization to be market sensitive, the supply chain should be capable of reading and responding to real demand.
Virtual (information integration)
By using information technology, the distance between buyers and suppliers is reduced and therefore data can be shared among them. This, in effect, creates a virtual supply chain and is information-based rather than inventory-based which conventional logistic systems are based on. Electronic Data Interchange (EDI) and the Internet make it possible for partners in the supply chain to act upon the same data, real demand.
Process Integration (Collaborative relationship)
Process Integration is the collaboration between buyers and suppliers, joint product development, common systems and shared information.
Thus, for supply chain partners to be able to share information, process integration is requisite. This type of cooperation ensures companies to focus on their expertise and outsource other activities.
This form of a relationship among alliance partners is essential and inevitable which also means that an ethos of trust and liability must triumph.
Network based (Process integration)
As the foundation of the supply chain, network based can be interpreted as the supply chain’s coalition of partners connected into a network.
Figure 11: Characteristics of agile supply chain
3.5 Supply chain management in Agile Manufacturing
Due to the greater need for quick integration among members of Agile relationships, organizational relationships within the Agile environment are expected to become more complex. This comes from the variety of relationships and partners that will need to be managed. As a single organization, consisting a web of partners, the absolute goal is to reach a global optimal relationship to address the final customers’ requirements.
Supply chain management is the management of processes and activities which relates to the flow of transformation of goods from raw materials to the end user as well as the
information flows. The traditional concept of the management of direct relationship between customer and supplier has grown to incorporate the management of the relationships that include the chain of suppliers as well as the chain of customers.
Technology such as Electronic Data Interchange (EDI), Enterprise Resource Planning (ERP), Computer Integrated Manufacturing (CIM) systems etc. had also a beneficial impact to the growth of supply chain management. In this manner technological, organizational and operational factors have all come together to form the area of supply chain management. According to J. Sarkis and S. Talluri the evolution of supply chain management has provided a number of practices that relate to the improvement of agility between organizations. To present these practices four areas will be looked at which are supplier relationships, customer relationship, internal organization processes and system.
Supplier relationships
The literature acknowledges that a good customer-supplier relationship is needed to be cost-effective in an organization. Agile benefits can be achieved when having close partnership relationships with suppliers and may be based on the factors low price, quality, on-time delivery, reactive and helpful, technically innovative and trust.
Christopher mentions that three prerequisites are required in order to leverage the opportunity for a better agility through closer supplier relationships.
One is that the supplier base should be rationalized. A limited number of strategic suppliers should be identified with whom the Agile companies can work with through linked systems and processes. Second prerequisite, for a more agile supplier base, a high level of shared information is needed. The visibility of downstream demand should be made clear
throughout the whole chain. This is important for the creation of an environment where information can flow freely in both directions in the chain.
The final prerequisite is the urgency for a high level of connectivity between the company and its strategic suppliers. With this is meant the multiple, collaborative working relationships at all levels.
Customer relationships
Customer relationships issues focus on linking the customer to the supply chain. The
extension of this relationship is necessary in Agile organizations which includes engineering, logistics, manufacturing and purchasing.
Data and communication integration is required in order to link the customer to the supply chain. Agile suppliers reduce their customer base to get rid of the bad customers, which may not always be realizable. Being a good customer is the key in attracting good suppliers. The consequence of being a good customer results in the reduction of frustration level and improves product quality while reducing purchasing costs.
A good customer- supplier relationship recognizes that a partnership is a two-way street, rewards the best suppliers and encourages the involvement of the supplier in product development (Sarkis & Talluri, n.d.).
Internal organization processes
The roles of purchasing, as a management issue, should be considered as a strategic function. Any systematic organizational effort to build and maintain a network of suppliers can be defined as a supplier development program. This is an integral part of supply chain management practices. A purchasing organization must review the aspects of its own operations that can negatively affect the supplier performance.
Supplier selection is a process that requires a significant quantity of managerial resources. The organizational process of supplier certification is related to the supplier selection and the standardization of the certification program has made the development of Agile supply chains possible.
System
Continuous improvement plays an important role in the management of the supply chain system. Continuous improvement enables the supply chain links to strengthen with the feedback among the organizations.
Optimization of relationships link by link does not guarantee an optimal improvement. The needs of organizations vary as well as the needs among various relationships. An almost complete supply chain improvement may be possible in some cases which is hard to achieve, but this is not the case for many supply chain relationships.
4. Lean and Agility: Leagility
In the previous chapters the basis of the two paradigms were described. In this chapter the combination of the two in a supply chain will be discussed.
Leagility stands for the combination of the two words “Lean” and “Agility”. Lean in the supply chain is necessary for the elimination of waste and keeping low cost while agility in the supply chain is necessary for the quick responsiveness to the changing demand of the market.
4.1 General positions with respect to Lean and Agile
In the literature can be found that there has been a tendency to view the development of Lean Manufacturing and Agile Manufacturing either in a progression or in isolation (Inman, Sale, Green, & Whitten, 2011)(Gunasekaran, 1999). Krishnamurthy and Yauch (2007) state that there are three general positions with respect to Lean and Agile:
- Distinct concept that cannot co-exist - Mutually supportive concepts
- Lean as a precursor to agility
Lean and Agile as distinct concepts that cannot co-exist
Lean and Agile are often pitted as opposing paradigms. They emphasize different elements while both strategies have to deal with the same competitive priorities which are cost, quality, service and flexibility. While Agile Manufacturing does not aim its attention on cost but on speed and flexibility, some would assert that Lean Manufacturing subordinates the responsiveness to productivity and efficiency. The market winning factors differ as well between the two paradigms. Lean Manufacturing considers cost as the winning market factor while speed, flexibility and responsiveness to changes are the winning market factors of Agile Manufacturing. To maintain the higher service level which is required by Agile firms higher inventory levels and larger lot sizes could be necessary. On the contrary, Lean firms need smaller lot sizes and lower inventory levels in order to be cost-efficient.
Some believe that manufacturing systems can consist of both to exploit market
opportunities. Nevertheless, this seems not appropriate for single manufacturing firms but for supply chains. Although there is a study which discusses the implementation of both Lean and Agile in a manufacturing system that hybridizes the technical attributes of both
paradigms (Elmoselhy, 2013). The decoupling point in Leagile supply chains ensures the separation between Lean and Agile, with Lean on the upstream side and Agile on the
downstream side with respect to the decoupling point. The two are mutually exclusive within a single manufacturing firm albeit both may exist within a supply chain (Inman et al., 2011).
Mutually supportive concepts
In the literature, Lean has been described as an overarching concept that is compatible with any production system, it should be compatible, complementary and mutually supportive with Agile Manufacturing (Krishnamurthy & Yauch, 2007)(Ben Naylor, Naim, & Berry, 1999). This results in achievement of benefits which are not attainable when used in isolation.
Lean as a precursor to Agility
Some feel that Agile Manufacturing is the next logical step from the concept of Lean Manufacturing and that Agile Manufacturing can be realized by using existing systems and methods. In the literature Sarkis (2001) states a formula: Agile Manufacturing = Flexible
manufacturing + Lean manufacturing. Agile Manufacturing may include the paradigm of Lean production (Inman et al., 2011).
4.2 Comparison of characteristics of Leanness and Agility
Naylor (1999) developed a table which is based on the existing literature at that time on Lean Manufacturing, Agile Manufacturing and supply chain management on industrial case studies. In this table a few of the key characteristics of both paradigms are presented as supply chain strategies and where the importance of the different characteristics are rated. The prerequisite characteristics of either paradigm can be seen as essential, desirable and arbitrary to successfully implement them.
These characteristics can be classified in those of equal, similar and different importance.
Table 1: Rating the importance of different characteristics of Leanness and Agility (Naylor et al.)
The first three characteristics are rated essential for both paradigms. The use of market knowledge to identify the markets need or customer requirements, the capability of setting up a process from beginning to end to obtain long-term supply chain relationships or
temporary virtual networks, and the competence to reduce the lead-time are judged to be of equal importance.
The next two characteristics, which are “Eliminate muda” and “Rapid reconfiguration” are judged to be of similar importance. While Agile Manufacturing calls for a high level of rapid reconfiguration, this is not a prerequisite for Lean Manufacturing. Lean Manufacturing puts its emphasis on the elimination of muda. As can be seen in the table, the elimination of muda is still desirable in Agile Manufacturing as well as rapid reconfiguration in Lean Manufacturing.
As for the last two characteristics “Robustness” and “Smooth demand”, they are categorized as different importance. Flexibility is very important in Agile supply chains in order to be able to withstand fluctuations and ought to take advantage of these to maximise profit, hence robustness is labelled as essential. In opposition to Lean, Lean systems focus on minimizing internal and external variation as much as possible to obtain smooth demand.
4.2.1 Metrics
There are many metrics that can be considered as valuable. These metrics can be aggregated as Lead time, Service, Costs and Quality which defines the total value of a product to the end-customer.
Table 2: Rating the importance of the different metrics for lean and agility (Naylor et al.)
In the table can be seen that Agility puts its focus more on service than Lean does. The ability to reconfigure quickly would have an impact on the flexibility which is a component of service. Lean puts its focus on minimizing the inventory which is a component of costs. Therefore, from this table, can be seen that the best situation may be of a supply chain that contains both paradigms.
4.3 The decoupling point
In a Leagile supply chain, Lean and Agility are divided by the so-called decoupling point. The decoupling point is defined by Naylor (1999) as the separation of the part of the organisation oriented towards customer orders from the part of the organisation based on planning. This point is also a strategic buffer between the fluctuating customer orders and the smooth production output. Hence Lean is adopted upstream of the decoupling point and Agility downstream in a Leagile supply chain (Purvis, Gosling, & Naim, 2014).
The issue of postponement must be considered with the positioning of the decoupling point in order to gain higher efficiency of the supply chain. This is done by moving the product differentiation closer to the end customer. The risk of being out of stock for long periods and for holding too much stock reduces when the decoupling point is postponed. Postponement is based on seeking to design products using common platforms, components or modules but where the final assembly or customization does not take place until the final market destination and/or customer requirement is known (Christopher, 2000).
The relationship between the supply chain structure and where and when to use Lean or Agile manufacturing will be discussed. The two paradigms will be linked to the simplified supply chain structures which is shown in the figure below, with the decoupling point in different positions along the chain. As defined before the decoupling point splits the supply chain in a part where the products are pulled by and responds directly to the customer (downstream) and in a part that uses forward planning and a strategic stock to buffer against fluctuations in the demand (upstream). Where the decoupling point is positioned depends on the longest lead-time that the end-customer is prepared to accept and at which
Figure 12: Positioning of the decoupling point (Naylor et al.)
In the figure above five classes of supply chains are depicted which are: - Buy-to-order - Make-to-order - Assemble-to-order - Make-to-stock - Ship-to-stock Buy-to-order
In this type of supply chain the customer should be willing to accept the long lead-times. Because here the products are unique and do not necessarily contain the same raw materials, the supply chain would not have any costs of overstocking if a product failed to succeed in the marketplace. This type of supply chain however, would not be capable of taking advantage of new markets.
Make-to-order
Also for this type the end-customer might still have to accept long lead-times but is reduced relative to the Buy-to-order strategy. In this supply chain it is possible to change to different products as long as products are made of the same raw materials and can also cope with different locations, volumes and product mixes. The risk here is to keep raw materials and components as stock.
Assemble-to-order
The lead time in this supply chain, depending on where the final assembly takes place, will reduce significantly. The decoupling is positioned within the manufacturers/assemblers. Customization is postponed as late as possible to be capable of responding to a varied product mix within a range of products. The risk of overstock or understock therefore increases marginally. The products will not be of the same value as the complete assembled products and is protected against total obsolescence accordingly.
Make-to-stock & ship-to-stock
The make-to-stock strategy calls for a steady overall demand of a standard product and can cope with different locations. The ship-to-stock supply chain provides standard products in fixed places. The ability to accurately forecast the demand is necessary to minimize the risk of overstocks or understocks.
5. Conclusion
In this research the essence of Lean Manufacturing and Agile Manufacturing are clarified and how they relate to each other.
This research has been done on the basis of the following main question:
Can the two paradigms ‘Lean’ and ‘Agile’ co-exist in a supply chain to have a higher competitive edge in the volatile marketplace? And if so, how?
An important goal of Lean is to obtain a process with minimum waste for the sake of being a lucrative organization. Agility seeks on attaining a high service level by being flexible and having an organization that is able to respond quickly to changing demands of the customers. Nonetheless, neither paradigm is better nor worse than the other since both paradigms have been successfully implemented in isolation by many companies. The most important difference between the paradigms is the market demand.
Since Lean is very effective in a steady environment and Agility effective in an unpredictable environment, a market analyses is an indispensable activity before applying any of these paradigms.
When items can be made at a generic level in order not to have high stock-keeping variants, these components, modules or platforms can then be embodied in a variety of end products. This makes the system more flexible and makes forecasting at the generic level easier than at the level of the finished product. The most effective strategy that should be applied upstream from the decoupling point would then be the Lean paradigm as the demand is smooth and standard products flow through a number of value streams. As the demand is variable downstream from the decoupling point, the Agile paradigm must be applied.
Figure 13: Leagile supply chain
With the Leagile supply chain strategy, producing standard items from which customized end-products can result, it is indeed realizable to obtain a higher competitive edge in the marketplace which is achieved in practice by several companies.
