Archive for May, 2010


May 23, 2010

5S approach

The 5S approach is a method which helps to organise the workplace in order to increase efficiency and eliminate waste. One of the main ideas of 5S is the reduction of Non-Value-Adding activities (NVA).[1] To achieve this aim several steps have to be accomplished.

  • Seiri (sort): Unnecessary items -like equipment and not used machines- should be removed from the production area and the workplace in order of making it cleaner and clearer.
  • Seiton (straighten): The essential items for the process should be placed or arranged in a way that a clear identification and an easy access are guaranteed.
  • Seiso (shine): All items and the workplace have to be cleaned regularly, which means that cleaning is part of the daily work. During that step the whole equipment and workplace gets inspected for defects.
  • Seiketsu (standardise): The creation of visual controls and guidelines ensure that the workplace is clean and organized.
  • Shitsuke (sustain): Training and discipline to assure the durable compliance of the 5S.[2]

Implementation of 5S

The implementation process involves the 5 steps mentioned above. Each of them focuses on different methods to create the whole way of thinking.

Seiri (sort)

The first step in the implementation of 5S is the sorting. It’s necessary to create a project team and distinguish between necessary and unnecessary items in the production area. Items which are no longer required get marked with a red label. The sorting process is applied on tools, toolboxes, raw material, benches, machines and all other equipment located in the production area. The found items could be sold or discarded.[3]

It’s necessary to make decisions in a careful way. On the one hand the focus is on eliminating all items which are not supporting the process but on the other hand it’s important to consider the future and not sell or discard equipment which will be probably needed later.

Seiton (straighten)

Seiton describes the organising aspect of the 5S approach. The equipment should be placed in a way that the user has easy access to it. An elementary point during this step is to evaluate every item regarding its necessity and avoid taking items back to the process which are not needed.

During the new arrangement of the equipment it’s important to consider the frequency of use. If the item is often used it should be located at a place which is easy to reach. This ensures the ergonomics and therefore reduces the unfitness for work of the employees. The places chosen were marked with colors and a label.[4]

Seiso (shine)

The main targets in this step are the rules, methods and responsibilities for the cleaning process. Therefore it’s compulsory to select machinery, equipment and areas which have to be cleaned and to determine the respective method (broom, mop, hand brush). The responsibilities were scheduled and positioned at a place which is accessible for each worker. If the cleaning process is finished the executing person has to sign the schedule. The cleaning step has to be included in the everyday work of each employee.[5]

Seiketsu (standardise)

In the standardising phase the cleanliness gets maintained and the whole concept is daily routine.[6] This step contains the development of policies and guidelines which manage the disposal of unnecessary things. Furthermore standard procedures for each worker will be created. These checklists help the worker to accomplish the different procedures properly.[7]

Shitsuke (sustain)

This step should maintain the discipline and the compliance of each employee to the 5S approach. Hence it’s essential to check if everyone treats the workplace in a proper way. The management should encourage the employees for this purpose. The compliance could be improved through the implementation of trainings covering the aspects of the 5S approach.[8]

[1] Allen (2010), Introduction to Engineering Statistics and Lean Sigma, p. 125.

[2] Harry, Mann, De Hodgins (2009), The Practitioner’s Guide to Statistics and Lean Six Sigma for Process Improvements, p. 73.

[3] Carreira, Trudell (2006), Lean Six Sigma that works, p. 137.

[4] Harry, Mann, De Hodgins (2009), The Practitioner’s Guide to Statistics and Lean Six Sigma for Process Improvements, p. 74f.

[5] Dennis, Shook (2007), Lean production simplified, p. 36.

[6] Harry, Mann, De Hodgins (2009), The Practitioner’s Guide to Statistics and Lean Six Sigma for Process Improvements, p. 75.

[7] Suganthi, Samuel (2004), Total Quality Management, p. 208.

[8] Harry, Mann, De Hodgins (2009), The Practitioner’s Guide to Statistics and Lean Six Sigma for Process Improvements, p. 75.


May 20, 2010

SMED – Single Minute Exchange of Die

SMED is the acronym for Single Minute Exchange of Die and was invented by the Japanese Shigeo Shingō within the Toyota Production System (TPS). The focus at first was on the exchange of especial big, hardly to be used compression moulds but later it was applied in general to the exchange of tools.[1]

The basic idea of SMED is to accomplish as many steps as possible of the machine setup while it is working. This comprehensive approach leads to a considerable shortening of tool exchange and setup times. Through lowering these times the Single Minute Exchange of Die method provides the company with higher flexibility in the production. Therefore it’s possible to produce smaller batches and concurrently lower the costs and the lead time.[2]

The activities which have to be accomplished during a Single Minute Exchange of Die procedure are shown below:

Separating Internal and External Setup

The most important step by implementing SMED is distinguishing between internal and external setup.[3]

  • “Internal setup (IED), such as mounting or removing dies, that can be performed only when a machine is stopped”[4]
  • “External setup (OED), such as transporting old dies to storage or conveying new dies to the machine, that can be conducted while a machine is in operation”[5]

It is obvious that preparation of parts, maintenance and so forth should not be done while the machines are stopped. Nonetheless this is often the case. Thus mastering the distinction between internal and external setup is the passport to achieving SMED.

Converting Internal to External Setup

This stage can be divided into two important notions:

  • Re-examining operations to see whether any steps are wrongly assumed to be internal
  • Finding ways to convert these steps to external setup

Operations that are now performed as internal setup can often be converted to external setup by re-examining their true function. This requires the adoption of new perspectives which are not bound to old habits.[6]

Further improvements can be achieved with the implementation of standardisation into all setup processes, the introduction of quick releases, mechanisation and the parallelisation of setup processes.[7]

A passage which underscores the impact of setup time reductions on the improvement of production activities as a whole is given by Taiichi Ohno:

“Until some ten years ago, production in our firm took place as much as possible during regular working hours. Changes of cutters, drills and the like were relegated to the noon break or the evening. We had a policy of replacing the cutters after every fifty items. Yet as production has risen over the past decade or so, machine operators have often begrudged the time needed for these changes. For the multigrinder in particular, replacing the numerous cutters and drills took half a day. Since afternoon production would stop whenever a replacement was made on a weekday, workers were forced to work temporary shifts on the following Sunday. This was uneconomical and therefore unacceptable. Since we also wanted maintenance to be done during working hours, we began to study the question of how setup changes could be performed in a very short period of time. Shigeo Shingō, of the Japan Management Association, was advocating “single-minute setup changes” and we felt that this concept could be of great service to us. It used to be that after spending half a day on setup, the machine might be used for only ten minutes. Now, one might think that since the setup took half a day, production ought to continue for at least that long. This, however, would have left us with a lot of finished products we could never sell. We are now looking into cutting setup times down to a matter of seconds. Of course this is easier said than done. Somehow, thought, we must reduce the amount of time needed for setup changes.” [8]

[1] Kamiske, Brauer (2007), Qualitätsmanagement von A bis Z, p.299ff.

[2] Cf. Ibid.

[3] Shingō (1985), A Revolution in Manufacturing, p.29.

[4] Cf. Ibid, p.22.

[5] Shingō (1985), A Revolution in Manufacturing, p.22.

[6] Shingō (1985), A Revolution in Manufacturing, p.22. and Sheldon (2007), Lean Materials Planning and Execution, p.34.

[7] Kamiske, Brauer (2007), Qualitätsmanagement von A bis Z, p.300ff.

[8] Shingō (1985), A Revolution in Manufacturing, p.25f.

Value Chain Analysis

May 19, 2010

The value chain is a systematic approach to examining the development of competitive advantage. It was created by M. E. Porter in his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organisation. The ‘margin’ depicted in the diagram is the same as added value. The organisation is split into ‘primary activities’ and ‘support activities.’ Also so value curve.

Primary Activities

Inbound Logistics

Here goods are received from a company’s suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organisation.


This is where goods are manufactured or assembled. Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car’s engine.

Outbound Logistics

The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer.

Marketing and Sales

In true customer orientated fashion, at this stage the organisation prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix.


This includes all areas of service such as installation, after-sales service, complaints handling, training and so on.

Support Activities


This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organisations), and ePurchasing (using IT and web-based technologies to achieve procurement aims).

Technology Development

Technology is an important source of competitive advantage. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments.

Human Resource Management (HRM)

Employees are an expensive and vital resource. An organisation would manage recruitment and s election, training and development, and rewards and remuneration. The mission and objectives of the organisation would be driving force behind the HRM strategy.

Firm Infrastructure

This activity includes and is driven by corporate or strategic planning. It includes the Management Information System (MIS), and other mechanisms for planning and control such as the accounting department.


May 18, 2010

QCD- Quality, Costs and Delivery

The QCD approach was originally developed to help companies within the British automobile sector. Using QCD can clarify the priorities for improving the production processes in a company. The tools in the QCD approach can be used to assess the results of changes in production processes. They can be used as an instrument for rapid feedback which provides the actual facts and figures for the management to make meaningful decisions. With the gathered data it is furthermore possible to set goals for the future and fulfill continuous reports.[1]

To analyse the business processes of a company with the target of increasing the profitability there are seven steps which have to be considered. These seven key measurements offer a clear structure for continuous improvement, raising levels of customer satisfaction and improve the management of the whole production processes. They can be applied to improve production performance throughout manufacturing industry from the auto-industry to electronics, aerospace, telecommunications, textiles, building products, food and chemicals processing.[2]

  • Step 1: Not Right First Time (NRFT)

NRFT studies the quality of products. How often achieves the company the customer’s specifications. NRFT can be put into numbers, by measuring the number of “defective parts per million”. The number of the defect products has to be divided by the total quantity of finished products. This figure has to be multiplied by 106 to get the number of parts per million.[3]

Measuring Not Right First Time

There are two possibilities to measure NRFT: before (internally) or after reaching the customer (externally). If a company produces four defective parts on every thousand, this transforms into 4.000 parts per million. See the example below.[5]

After the evaluation of this figure, targets for improvement which are dependent on the industry best practice can be set. A lower rate of defective parts per million leads to an increasing customer satisfaction and improves also the quality of the products.[6]

  • Step 2: Delivery Schedule Achievement

Delivery Schedule Achievement analyses how well a supplier delivers what the customers need and when they need it. The goal is 100% on-time delivery of correct products. This goal has to be achieved as cost efficient as possible and therefore expensive special deliveries or payments for overtime should be avoided.

Measuring Delivery Schedule Achievement

A company makes 100 deliveries per week, of those eight are late and five are of incorrect quantities. The ratio of correct and incorrect deliveries has to be worked out for measuring how well the company delivers what the customers need.

Incorrect deliveries include late and as well early deliveries and also deliveries of the wrong quantity (too many, too few).[7]

  • Step 3: People Productivity

People Productivity (PP) is measured by looking at how long it takes (in staff hours) to produce a good in a satisfying quality. To fulfill the PP measurement it is necessary to take the number of good units and divide it by the total number of direct operator hours. Direct operators are the staff who is fundamental to the production process. The measure of PP helps to focus on a major product cost, the staff salaries.

Measuring People Productivity

A mobile phone factory has 30 employees making 90 phones an hour.

To reach a high value for PP it is absolutely necessary that most of the employee’s work is adding value to the product. The non-value adding activities should be minimised.[8]

  • Step 4: Stock Turns

Stock Turns (ST) is defined as the ratio of current stocks to finished goods.[9] The more quickly a company converts raw materials into finished products and sells them, the more quickly they receive valuable sales revenues. The ST ratio reveals how effectively the company is using funds.

Measuring Stock Turns

To improve the ST ratio it is essential to know the annual turnover of a product line and the respective amount of stocks. In the working example, annual product sales are 30.000 Euro and the value of the current stock is 10.000 Euro. Current stock includes work in progress, raw materials and finished goods.

The higher the number the better for the company. A low stock turn means that the money is tied up in stock, and therefore the company has fewer funds to invest in other parts of its business.[11]

  • Step 5: Overall Equipment Effectiveness

Overall Equipment Effectiveness (OEE) says how well the company is using its equipment and staff. The three inputs for the calculation are the availability, performance efficiency and quality rate.

Measuring Overall Equipment Effectiveness

There are three key points to look at: availability, performance and quality.

  1. To work out availability for a machine, it is necessary to have the amount of unplanned downtime. If it is planned that a machine should run 100 hours a week, but actually runs only 50 hours, the availability is 50%.
  2. Performance compares the actual output with the ideal output. If a process is assumed to take 10 minutes, but instead takes 20 minutes then the performance is running by 50%.
  3. To display the quality of goods, it is required to compare the number of good parts produced with the total. If a company produces 50 parts in an hour and only 25 of them are with saleable standard, this means quality is running at 50%.

Including these three figures in the equation above will give the overall equipment effectiveness, expressed as a percentage. The higher the percentage, the better is the company’s production performance.[13]

  • Step 6: Value Added Per Person

Value Added Per Person (VAPP) shows how efficient people are deployed to transform raw materials into finished products. The inputs for the VAPP calculation are the price of the finished product and the costs of the needed raw materials. Furthermore it is essential to know the number of direct employees, those who are vital to the production process.

Measuring Value Added Per Person

In this working example a company produces MP3-Players and sells a unit of them for 60 €, the components cost 10 € per unit and 20 employees are required to assemble one MP3-Player.

A high VAPP highlights many value added to the product by a single worker.[14]

  • Step 7: Floor Space Utilisation

Floor Space Utilisation (FSU) measures the sales revenue generated per square metre of factory or office floor. The office and the factory floor space represent expensive fixed costs. FSU can be used to look for the respective revenue of an individual area or for the whole factory/office floor space. In order to increase the revenue per square metre it is common to reduce the amount of floor space used. Layout changes are necessary, for example eliminating inventory to reduce storage areas. If the company succeeds in reducing the amount of used space they would be able to expand without the expense of acquiring or leasing new buildings.

Measuring Floor Space Utilisation

In the working example, given below, a company owns 2000m2 factory space. The sales turnover is 10.000 € per month. To calculate the FSU it is necessary to divide the turnover by the amount of space which is used.[15]

By implementing and applying these seven measurements significant improvements in the sections Quality, Costs and Delivery can be achieved. Therefore the QCD approach could provide the company with a long lasting competitive advantage.

[1] [retrieved: 08.05.2010].

[2] [retrieved: 08.05.2010].

[3] [retrieved: 08.05.2010].

[4] Lunau, Roenpage, Staudter, Meran, John, Beernaert (2006), Six Sigma + Lean Toolset, p. 101.

[5] [retrieved: 08.05.2010].

[6] [retrieved: 09.05.2010].

[7] Cf. Ibid.

[8] [retrieved: 09.05.2010].

[9] Hoyle (2005), Automotive quality systems handbook, p. 294.

[10] Cf. Ibid.

[11] [retrieved: 09.05.2010].

[12] Wireman (2004), Total productive maintenance, p. 47.

[13] [retrieved: 09.05.2010].

[14] [retrieved: 09.05.2010].

[15] Cf. Ibid.