Quantifying Bene® Ts of Conversion To Lean Manufacturing With Discrete Event Simulation: A Case Study
Quantifying Bene® Ts of Conversion To Lean Manufacturing With Discrete Event Simulation: A Case Study
Quantifying Bene® Ts of Conversion To Lean Manufacturing With Discrete Event Simulation: A Case Study
2, 429± 445
1. Introduction
1.1. Overview of lean manufacturing
Lean manufacturing is a comprehensive philosophy for structuring, operating,
controlling, managing and continuously improving industrial production systems.
Key tenets of this philosophy include the following.
. Process stabilityÐ establish processes that combine men, machine, and
materials to produce 100% quality products when they are needed to satisfy
customer demand. This involves attaining demanding standards in equipment
reliability, raw material and purchased parts quality, employee knowledge and
skills, and production quality control.
. Standardized workÐ explicitly de® ne current best practice (minimal manpower
and e ort, highest quality, highest safety) in performing each job and commu-
nicate this at the workstation. Shop ¯ oor workers make and own this de® ni-
tion and constantly seek to improve it. It is a benchmark for improvement but
never used as an individual performance-rating tool.
. Level productionÐ attain capacity balance and synchronization of all produc-
tion operations over time in a manner that precisely and ¯ exibly matches
customer demand for the system’s products. In the ideal, this means producing
every product every shif t in quantities equal to demand (after smoothing out
high frequency random components). Moreover, production cycle time should
be less than the customer’ s acceptable waiting time for order receipt to enable
demand-based scheduling. Level production is achieved through means such
as rapid machine set-ups/changeover and ¯ exible, multi-machine manning
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430 R. B. Detty and J. C. Y ingling
applying lean principles to their system. This tool should be adaptable to the speci® c
circumstances of the organization, and should be capable of generating resource
requirements and performance statistics for both the proposed lean system and
the existing operation. This information would enable management to assess the
performance of the lean system in absolute terms and, most importantly, relative
to the well-understood, existing system it is designed to replace.
It is the hypothesis of this paper that discrete event simulation can provide
such a tool. Of course, some of the very important bene® ts from applying lean
manufacturing principles do not lend themselves to quanti® cation by computer
modelling, e.g. those that are the result of employee empowerment, continuous
improvement, organizational learning, and revised management structure, roles,
and information systems. However, simulation can quantify the performance
improvements that can be expected from applying the lean manufacturing shop-
¯ oor principles of continuous ¯ ow, just-in-time inventory management, quality at
the source, and level production scheduling. Simulation has the capability of demon-
strating the bene® ts of lean manufacturing throughout the entire manufacturing
system including:
Finally, simulation through animation can provide a visual and dynamic illus-
tration to management of how the new system would work.
The literature reports many previous applications of discrete event simulation to
address aspects of lean manufacturing. These applications can be grouped into two
general categories.
transported to a distribution area for shipment. Lots that fail AOQL procedures are
returned to the assembly cell for rework. After rework, depending on the nature of
the defects, the lot is either shipped to distribution, or returned to AOQL for a
second inspection.
The assembly cells are supplied with parts from two parts storage areas and two
satellite subassembly areas as follows:
. the W arehouse supplies approximately 50 of the smaller parts directly to the
assembly cells. These parts are transported via forklift truck approximately
170 m from the storeroom to the assembly cells and satellite subassembly
operations;
. the Exchange part storage area that is the assembly cell’ s source of over 20 of
the larger parts. The exchange area is located adjacent to the assembly cells,
and a supply person from each cell, using a handcart, transports pallets of
parts from exchange. The parts in exchange are packaged in pallets with 4± 50
containers/pallet, with the containers holding from 18± 250 individual parts.
Pallets of parts from vendor trucks are unloaded to the warehouse for later
transport to the exchange area via forklift trucks, a distance of approximately
210 m;
. the Pre-Assembly operation that supplies two small subassemblies to the
assembly cells. Each of these subassemblies comprises 3± 4 individual parts
assembled with the aid of a small, hand- or air-actuated ® xture. Pre-assembly
is supplied with parts from the warehouse via forklift trucks, and maintains a
substantial parts and ® nished-assembly inventory. The assembly cell supply
person transports the subassemblies from the pre-assembly area to the cells.
The operation has 8 employees, including a supervisor;
. the Kitting operation combines approximately ten small items into a kit of
miscellaneous items that are included in the product container. The kit items
are supplied both from the exchange area and the warehouse. Like pre-
assembly, kitting has a large inventory of parts and completed kits. There
are nine people including a supervisor employed in this operation.
Additional features of production control and information ¯ ow for this system
include the following.
. The cells order parts from the warehouse via an electronic ordering system.
. Each pallet of parts in the exchange area has a kanban card attached to it,
which is removed and placed in a kanban collection box when the pallet is
removed from the exchange area by the cell utility person. (Parts are removed
from the exchange area in pallet quantities. ) The kanbans are collected the
following morning and orders to replace the withdrawn parts are electronically
transmitted that same morning to the supplier for delivery two days later.
. The exchange area has a limited amount of space that is partitioned into pallet-
wide rows with each row labelled for the parts stored in that row. As pallets of
parts are removed to meet the needs of the assembly cells, a forklift driver
(based on visual observation ) brings a replacement pallet from the warehouse.
. Inventories for non-exchange-stored parts are controlled by an MRP system.
The details of this system, due to proprietary concerns, were not available to
this study. Therefore it was assumed (based on observation ) that warehouse-
434 R. B. Detty and J. C. Y ingling
supplied parts were reordered weekly for delivery three business days later.
Also, a two-day warehouse safety stock was assumed.
. Empty part containers from the exchange area are transported back to the
warehouse by forklift and returned to suppliers for reuse.
. Production scheduling results in large batches of individual models, with
model changes limited to once or twice a week for the entire plant.
Figure 1 shows the layout of the entire system including the assembly cells, the
warehouse and exchange areas, the subassembly operations, and the PPVT and
AOQL testing areas.
3.1. Improve ¯ ow by integrating pre-assembly and kitting into the assembly cells
The ¯ ow of the total assembly process is disrupted by the satellite pre-assembly
and kitting operations. As the system is presently laid out, pre-assembly and kitting
are isolated islands of activity that create waste in the form of unnecessary handling,
inventories, transportation and system delay, in addition to under-utilizing employee
capabilities.
A review of the work performed at the individual workstations in the assembly
cell indicated that the allotted `takt’ time (80 seconds) for these activities exceeded
the assembly task requirements by 10± 20 s, depending on the workstation. The pre-
assembly and kitting operations can readily be consolidated into the assembly cell
operations by adding another person and workstation to each cell.
The bene® ts anticipated from this modi® cation include reduced inventories,
¯ oor space, product cycle time, transportation requirements, and freeing nine
people for other projects. A minor negative is the cost of duplicating ® xtures for
each assembly cell.
. upgrade the skills of team members through training on problem solving, and
kaizen methods;
. enhance procedures at each workstation to inspect the work from the previous
station and to self-inspect its own work;
. increase use of visual management methods to increase/maintain awareness of
potential problem areas, quality goals and results;
. establish poka-yoke and visual systems at critical assembly steps;
. install an andon system that cell operators can trigger when problems are
encountered;
. improve quality-at-the-source practices at supplier operations.
. reduce inventory and ¯ oor space for the warehouse and exchange areas to
re¯ ect the revised supplier delivery cycles, reduced lot sizes, and mixed-
model scheduling;
. relocate the warehouse adjacent to the assembly cells;
. establish a separate storage area for safety stock. Safety stock should equal one
day’ s supply for the lean system, and two days for the existing system.
These modi® cations reduce the exchange and warehouse ¯ oor space requirements
by approximately 50% and allows the warehouse and exchange areas to be located
close to the assembly cells, thereby reducing transport distances between the ware-
house, the exchange area, and the assembly cells to under 80 m. Incoming supplier
trucks can now be unloaded directly into the exchange area, eliminating the double
handling and much of the warehouse area. The proximity of both the warehouse and
the exchange areas to the assembly cells enables the standardized part restocking
route mentioned previously. Forklifts are needed only for moving parts from the
supplier trucks to the consolidated exchange/warehouse area (and, in rare instances,
to move safety stock). Figure 2 illustrates the layout of the proposed lean system.
(1) System Flow Time. Average time parts spend in the system from arrival in
warehouse to departure to distribution.
(2) Order L ead Times. Time between order receipt and the arrival of correspond-
ing ® nished goods at distribution for shipment.
(3) Average Inventory L evels. A time-weighted average of the quantities of parts
in the various inventories in the system.
(4) Relative Inventory Floor Space Requirements. The inventory storage space
requirement immediately after restocking. This measure is based on the
physical dimensions of the pallets, but does not re¯ ect space required for
access aisles or shelving.
(5) Time Between Departures from ExchangeÐ time between pallet withdrawals
from exchange. This statistic provides insight into the frequency and vari-
ation in the frequency of withdraws for each part, and demonstrates the
impact of production scheduling on supplier demand. The variance of this
statistic is more important than the mean, which is the same for both the
existing and the lean system.
(6) Utilization Rates. Percentage of time a resource such as the assembly cells,
forklift trucks or the cell supply people are busy.
(7) Counters for Absolute Quantities of parts (pallets, containers, parts), sub-
assemblies, ® nal products, orders, shipments, units rejected in AOQL and
reworked.
L ean manufacturing with discrete event simulation 439
Referencing ® gure 3, the transient period was established at 18 000 minutes of run
time for the existing system, and 11 000 minutes for the lean system.
Series 1 results were then established based on the average of data from ® ve
replications. In each replication, the statistics were cleared and reinitialized at the
end of the transient time period, and collected for 40 000 minutes thereafter.
In Series 2, the transient analysis of order lead-time for the existing system, with
its large batch-size pull scheduling posed di culties. As shown in ® gure 4, steady
L ean manufacturing with discrete event simulation 441
state is not reached in the time it takes to receive over 600 orders, approximately
100 000 minutes, or 5 months. (In a very long run, at a lower order arrival rate of
approximately 50% of capacity, the existing system reached steady state after
approximately 260 000 minutes, over 13 months of operation. ) Presumably the
system with a demand rate of 85% of capacity would eventually reach steady
state, but excessive run time duration made such a determination impractical. The
high variance of the performance measures and excessive duration of the transient
interval for the large-batch pull system, moreover, makes the meaning of such a
steady state measure dubious. For the lean system, in Series 2, the transient
period for order lead-time (also shown in ® gure 4) was so small as to be considered
negligible. The performance of the two systems in Series 2 was established by aver-
aging data from ® ve 100 000 minute replications without correction for a transient
period.
5. Discussion of results
S eries 1 Results: The bene® ts of the lean system (relative to the existing system)
quanti® ed by this experiment include the following.
(1) Average time parts spend in system reduced 55%.
(2) Model changeover times reduced in the assembly cells from 11 to 3 minutes.
(3) Reduction in the time-weighted, average inventories throughout the system:
. 70% lower warehouse inventories;
. 63% lower exchange inventories;
. 75% reduction in assembly cell inventories;
. 100% reduction in pre-assembly and kitting inventories (parts and WIP);
and
. 10% reduction in ® nished goods inventory.
(4) Reduction in ¯ oor space requirements:
. 37% in Warehouse area due to reduced maximum inventory levels;
. 51% in Exchange area from lower maximum inventory requirements;
2
. 560 m reduction from consolidating AOQL, pre-assembly, kitting into
assembly cell;
Floor space requirements in the assembly cells are also reduced by lower cell
inventories. These savings have not been quanti® ed due to the uncertain
impact on ¯ oor space requirements of the parts handling ¯ ow racks proposed
for the lean system.
(5) Substantially lower variability in demand from parts suppliers. While, as
expected, the average time between withdrawals from the exchange area is
essentially the same for both systems, the coe cient of variation (the ratio of
the standard deviation to the mean of the observations) is from 70%± 90%
lower for the lean system. Figure 5 illustrates, for a typical part, the di er-
ences in the two systems in this measure. A level demand from the ® nal
assembly process levels demand throughout the supply chain and allows
the entire supply chain, not just the ® nal assembly process, to be lean.
(6) Substantially reduced forklift truck utilization and transport distance
requirements. As a result, seven forklifts were not needed in the lean system.
442 R. B. Detty and J. C. Y ingling
(7) Nine employees from pre-assembly and kitting and seven forklift drivers
can be reassigned to other activities. In addition, as quality at the source
improvements are demonstrated, a substantial number of the nine employees
currently assigned to AOQL can be reassigned.
6. Conclusions
Discrete event computer simulation has been shown to be a tool that can help
quantify the bene® ts of lean manufacturing. The use of simulation in the manner
prescribed in this paper can provide creditable estimates of the savings in shop-¯ oor
resources and the improvements in time-based performance statistics that are
achievable with lean manufacturing. In the case study examined, simulation demon-
strated the impact of lean principles in terms of improvements (reductions) in:
. inventory, ¯ oor space, transportation, manpower and equipment require-
ments;
. time-based performance measures, such as model changeover time, order lead
time, and system ¯ ow time; and
. reduced variability in supplier demand.
The availability of this information both facilitates the decision to adopt lean
principles and strengthens the organization’s commitment during the implementa-
tion phase. Moreover, by comparing actual plant performance during the implemen-
tation of lean procedures to the simulation results, it also provides a benchmark to
judge the organization’s implementation e ectiveness and the need for remedial
action.
Con® rming previous work by others, simulation is also shown here to be an aid
in analysing, designing and improving speci® c elements of lean manufacturing
systems, speci® cally:
. as an aid to establishing speci® c parameters of a system. It this study, the
feasibility of using the cell supply person to transport both warehouse and
exchange parts to the cell and to return empty cartons to the warehouse for
reuse was demonstrated;
. as a tool for quantifying the impact of system improvements. For the
case study assembly operation, the bene® ts of consolidating the satellite pre-
assembly and kitting operations into the assembly cells were clearly translated
in terms of reduced system ¯ ow time, inventory, and transportation require-
ments.
It is hoped that this paper will advance the use of simulation to help companies
make the initial commitment to lean manufacturing, as well as to provide the incen-
tive and motivation for them to stay the course during the inevitable di culties they
will encounter during implementation. As mentioned earlier, many of the bene® ts of
lean manufacturing cannot be quanti® ed with simulation modelling. Instilling proper
organizational values, organization learning and employee empowerment systems,
continuous improvement programmes, and setting up a consistent organization
structure as well as management information systems, are essential, mandatory ele-
ments of lean systems. If these management principles are not fully adopted along
with the factory ¯ oor principles, the lean system will not achieve the bene® ts quan-
ti® ed in this study and its performance could be inferior to the system it replaced.
However, assuming both management and factory ¯ oor principles are rigorously
applied in the new lean system, the performance of the lean system will likely be
signi® cantly greater than predicted.
It is also critical to remember that lean manufacturing requires a factory ¯ oor
focus, and computer simulation analysis should not detract from this `shop-¯ oor
® rst’ philosophy, nor should it substitute for or impede the ¯ ow of information from
the factory ¯ oor. Rather, simulation should be a tool that enhances the shop-¯ oor
® rst philosophy by observing and quantifying long term e ects that are not readily
apparent on the ¯ oor, are available from traditional factory information systems, or
are too expensive or time consuming to experiment with on the ¯ oor.
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