The absence of waste makes for high productivity. Over the last couple of years, it has become very fashionable to talk about lean operations. This session today is about Lean, it is about waste , and it is about waste reduction, which is the process of making an operation Lean. Taiichi Ono, the former chief engineer of, of Toyota, wrote a wonderful book outlining the principles of the Toyota production system. Ono writes that moving is not necessarily working. This is really deep. Let me repeat this. Moving is not necessarily working. In our session on process analysis, we talked about idle time as a way that workers are unproductive, they're hurting us on labor productivity. All known by outlining these seven sources of waste that we're going tp talk about in this session, reminds us that there are other ways you can be unproductive than being idle. We'll talk about the Toyota production system in great length, later on in this course. A cool byproduct of this is that you're going to have a little bit of Japanese vocabulary to impress your friends and your co-workers. Waste stands for muda, and this session is about the seven sources of waste. So first of the seven sources of waste is overproduction. At the risk of upsetting my fellow Germans, let me share with you the following example. The average German trashes 81.6 kilograms of food every year. The reason for that? Germans like to buy in large package sizes. This, however, creates a mismatch between supply, what they get into their fridge, and demand, which is what they eat. This is inventory which we know is bad, just from a working capital perspective of the households, but since inventory can also get obsolete, [unknown] describes problem. Let me illustrate the second source of waste, transportation, was another German example. Crabs are fished in the North Sea next to the German and Dutch coastline. They're then shipped 2,500 kilometers south to Morocco. Labor is cheap in Morocco, and that is where the food is prepared. It is then shipped back to Germany. This shipment back and forth, truly reflects owner's idea of moving but not really working. There's no direct value add by shipping these crabs up and down through Europe. Whenever transportation occurs, we see a poor layout of the process. And we are creating lots of extra work that is not necessarily a link to the productivity of the operation. The third form of waste is rework. Rework refers to repeating or correcting an operation because of quality problems. An old Japanese quality saying goes, do it right the first time. Rework is a pain. Rework consumes capacity and takes it away from flow units that could be otherwise served. Rework is by no means limited to the world of manufacturing. For example, in healthcare operations, a readmission to the ICU is often referred to as a bounce back. Patients get discharged from the ICU, but then later on develop complications in the regular unit and bounced back to the ICU. From an operations perspective, this is rework. Readmissions to the hospitals are also a form of rework. Dealing with readmissions has been a major component of the Affordable Care Act, and has become a big thing these days in the healthcare operations community. Let me illustrate the fourth source of waste, over-processing within other healthcare examples. Oftentimes, you notice when you're in a hospital, it's not entirely clear how long are you going to stay there. The discharge of a patient is crucial for the capacity management of the hospital, but often the hospital lacks clear processes and standards of how long the patient should stay, to the extent that the patient stays longer than needed, the hospital is wasting through over-processing. In the day-to-day life, over-processing simply corresponds to stirring a fully mixed cup of coffee. Again, typically, the driver behind overprocessing is that the operator really doesn't know what the exact standard of his work is going to be. Just as a transportation was a form of moving but not working, you often find a similar effect within a workspace. The idea of unnecessary emotion, the fifth source of waste, is that you can achieve tremendous productivity improvements by a careful and economic design of the workspace. You see this when you look at great athletes. I'm a big cycling fanatic. I often admire the great athletes as they sit on their bike with their upper body not moving at all, all the action being in the legs. They get all the energy, all their capacity is moved towards where it matters as opposed to moving the upper body which really doesn't help them go forward on the bike. The sixth source of waste is inventory. Want to view this as the biggest waste of all. His view was, product has to flow like water. Wherever there's inventory piling up, we have a mismatch between supply and demand. For physical products, inventory takes the form of raw materials work in process inventory of finished products. This sort of inventory is bad because it costs us money. Remember, our discussion on inventory turns. But it is also bad because it requires storage space. Inventory as we previously discussed, is by no means limited towards the world of manufacturing. Loan applications at a bank might not require a lot of real estate but certainly an expensive form of inventory because it lead to customer wait time which is the seventh source of waste. Waiting, the seventh and final source of waste, is often a direct consequence of inventory. This is a situation where a floor unit is waiting for a resource. However, notice that also, the opposite can happen. The resource can wait for the floor unit. In this case, waiting takes the form of idle time, something that we have discussed at great length earlier on in the process analysis module. The impact of Ona's work and the success of Toyota production system was long ignored in the Western world. It took until the 1980s and a team of researchers of the International Motor Vehicle Program, around Jim Womack, to demonstrate the real power of the Toyota production system. The researchers went on to the world and benchmarked the productivity of all the motors plants. In this table here, you'll see a comparison between a GM plan of the 1980s and a Toyota plan. The table compares a couple of dimensions. Gross assembly cut hours per car captures the labor content that we've introduced previously. If you've notice, the Toyota employee take only about half of the time to put a vehicle together, assembly defects for a hundred cars captures. How many rework needs there are at the end of the red line? You notice again, a factor of three difference in productivity. Several patterns exist for the real estate requirement and then, more significantly in terms of the inventory. While GM, at the time, took two weeks of inventory, the Toyota employees only required two hours of inventory sit at their assembly line. So, these were the seven sources of waste. You'll notice that the first five sources, overproduction, transportation, rework, overprocessing, and unnecessary motions, in many way, were resource-centric. They looked at the worker and asked, what did the worker do in the last hour? Pointing out that not everything that the worker does is actually value at, An experienced management consultant has once told me the following trick. When you go through the process, when you visit a restaurant, a manufacturing plant, just stand still. Then you turn around for about 360 degrees, and you count the workers that you see as you are doing this. Count those that are directly adding value to the customer and count those that are idle or that are engaged in rework, transportation motions or other things that are waste. This gives you, very quickly and very casually, a sense of how much research is in the process. Now, a word of caution. Arguably, this is not how you're going to make yourself popular at work, so just don't stand there turning around and coming up with wise thought, but I think you will agree with me that lots of the things that we do at work is not necessarily adding value to the customer. As Ono put it, moving is not necessarily working. The last two sources of waste, inventory and waiting, are really the, two, two sides of the same coin. This is just a reflection of little slot. They look at waits from the customers, from the floor unit's perspective, pointing out that most of the time, we just sit in the process without getting any value for it. Now, people often refer to an eighth source of waste. This is a waste of intellect. Oftentimes, managers think of their workers as human robots, just there to execute orders. Wasting the intellect of workers misses the opportunity of engaging the workers in problem solving and process improvement. This is one of the key ideas behind Kaizen, a piece of the Toyota production system that is about worker involvement.
