LEAN

MANUFACTURING

Implementing Lean in a High Mix, Low Volume Shop

A Primer for Successful

Lean Projects in a Job Shop

LEAN MANUFACTURING

T
here is no doubt that owning and running a job shop in todays economy is difficult.
You are facing more strenuous demands customers are demanding price reductions

and ever-higher levels of service, material prices continue to increase, and finding skilled
labor is a challenge. Your burdens are not getting any lighter. Yet, the need to remain
profitable and relevant to your customers does not go away, no matter what the external
circumstances. You still need to maintain and grow your business. In your search for
effective strategies, you may have determined that implementing lean strategies in your
shop could be a viable option to meet these challenges. However, even as you researched
or learned how effective lean could be, you may have also realized that in many ways it
may not apply to the type of shop you are operating.
Fortunately, there are ways that you can apply lean principles to a job shop.
With forethought, planning and making adjustments specifically for a high
mix-low volume environment, you should be able to use lean methods in
your business. For a typical small to mid-sized job shop, using the right lean
initiatives and the right shop floor management or ERP solution, it is possible
to achieve a 30% cost reduction across the entire operation. Lean can applied
to your shop, from the shop floor to front office.

A PRIMER

This business guide is intended to be a primer for small and mid-sized job
shops characterized with a high mix of products of relatively low order quantities. It is intended to
highlight specific lean concepts that are applicable to a dynamically changing shop characterized by
a wide mix of parts that may change from one week to the next. By implementing the RIGHT lean
techniques and leveraging systems to support lean, you should be able to achieve significant cost
reductions while improving your overall business.
This business guide is organized into three sections.

Section I: Introduction to Lean and Getting Ready

In this section, we will review a brief history of lean, and why it can be so challenging to implement in a
job shop especially if your shop manufactures custom, made-to-order parts. We will then cover how
to prepare your company for lean, and how to get ready to launch your own specific lean initiatives.

Section II: Sustaining a Lean Program in the Shop

In this section, we will look at how to sustain a lean program as a long-term business strategy. Proper
implementation takes time, and it is important to understand how to keep the program going for the
long haul. We will also look at some of the specific lean tools that are useful on the shop floor, and how
to utilize them to maintain your initiative.

Section III: Implementing a Lean Initiative in the Office

In the final section, we will look at how lean is applicable in the office as well. You may be surprised to
discover just how effective lean principles can be in this often overlooked area of the job shop business.

Section I: Introduction to Lean and Getting Ready

A Brief History
A short look at the history of lean will quickly show that the idea is anything
but new. The roots of the approach began in 1900, when time and motion
studies were first conducted. This effort to measure efficiency led to Fords
development of the assembly line production system in the early teens and
20s, and on to Demings analysis of the Japanese management style and the
resulting factory organization of Toyota.
Most of the current lean concepts and philosophy are heavily influenced from
the Toyota Production System, which went into full swing in the 1970s. The
Toyota system, drew much from the previous efforts at waste reduction. The company did prove how
effective a lean approach could be as evidenced by its massive success over the next 30 years.

The Challenge of Lean in a Job Shop

What you have probably noticed from your research on the history of leans development is how
its successful application was applied in environments very UNLIKE job shops. Consider that
traditional model for lean the Toyota Production System of the 1970s. The factories were highly
specialized producing a high volume of parts in a low mix environment. Many of the traditional
lean methodologies one-piece flow, Kanban, visual cues, value stream mapping and other lean
cornerstones were developed and refined in large manufacturing environments.
In these situations, assembly lines and often entire factories were designed around manufacturing only
one or perhaps a few dozen different parts. The items being manufactured varied little if any from one
another. Without a doubt, this type of manufacturing is almost completely opposite in comparison to
the workflow of the typical job shop.
Even if you just look at four types of business models for typical manufacturing companies, you
quickly realize that their business issues and mode of operations are quite different so a one size fits all
approach to lean will not work in every environment:

Engineer to Order (ETO) Make to Order (MTO)

Assemble to Order (ATO)

Make to Stock (MTS)

No finished parts or subassemblies stocked.

No (or few) finished parts or

sub-assemblies stocked.

Pinch point parts or subassemblies stocked.

Most end items stocked in

finished goods inventory.

No raw material and only

common components
stocked.

Some raw material and subcomponents stocked.

All raw materials and subcomponents stocked.

All raw materials and subcomponents stocked.

Significant engineering
required before release to
production.

Usually customer-supplied
print. Minor adjustments to
print may be required.

Engineering complete.
Configuration options may
be available.

Engineering complete.

In fact, your job shop probably may even fit somewhere between several categories. You likely carry
little if any finished goods inventory. It is likely that external customers send you orders for new or
unique parts that largely determine your work in process. In addition, most of the material consumed
in your shop is probably bought specifically for a job and just in time for manufacturing. As you
conduct further analysis of your operation, you may even discover that you might have several types
of manufacturing environments within the four walls of your shop.

Frustrations and Previous Efforts

Those of you who have previously tried to implement lean principles in your shop probably
encountered frustrating difficulties. After a few failed attempts, where you discovered that the lean
initiatives you implemented just did not work, you may have discarded the concept entirely.
Because your shop deals with a very high mix of parts at a low volume, this makes them much more
susceptible to the volatility of change, whether it is the push or pull of delivery dates, engineering
changes or product mix changes that can occur week to week or even day to day. Your customers
likely challenge you with constantly changing demands and requirements, as well as alterations to
existing orders.
Most job shops also struggle with a limited shop staff that are not dedicated to specific machines or
operations but must float from machine to machine as demand necessitates. Because your shop may
experience bottlenecks that actually shift from one week to the next, you must respond and adjust
regularly to shifting capacity requirements.

So Whats the Magic Answer?

Can lean manufacturing actually work for a job shop? The key to implementing any initiative is
to first understand what type of shop you operate. Then, you need to sift through the mountains
of information available about lean and figure out which elements make sense for your specific
environment. Finally, you need to push through and maintain the change for the long haul.
This long-term approach is paramount, and it requires steady leadership to gain the benefits of the
transformation.

The Three-Year Plan

To begin implementing lean for your shop, you need to look inwardly at your business and develop
a three-year business plan. This will help you establish a road map for your business and your lean
initiatives. Using input from a variety of sources, you can construct the ideal path towards a successful
implementation of lean.
A three-year-plan is important because it can help you get out of firefighting mode and help you to
develop a strategic view. You can pause, or take a recess to assess your business. It also provides you
the opportunity to communicate in a tangible way to your entire company the seriousness of your
lean journey a journey that is vital to the long-term success of your business.

Determine Where You Are and Where You Need to Go

The first element of your plan will involve a SWOT (Strengths, Weaknesses, Opportunities and
Threats). This will help you determine your companys internal strengths and weaknesses, and the
external opportunities and threats in the customer and competitive marketplace.
You need to identify which key stakeholders are vital to your business, and what internal and external
barriers you need to overcome. The SWOT analysis will allow you to do this by providing a framework
for you to compile critical business data such as sales data, price and lead time expectations from
customers, capital expenditures required and future profit trend analysis.

Determine Your Core Competencies

In developing your three-year-plan and as part of the SWOT analysis, you need to determine what
the core competencies of your business truly are. Once you understand what your shop excels at,
you can see how well your company is aligned with its core competencies. Using formal surveys
and inputs from your internal stakeholders and your external customers, you can help gauge these
competencies. Other tools and techniques, such as a machine matrix and a final competency matrix,
will also assist in the development of your plan.

Internal Stakeholder Survey

You should conduct an internal stakeholder survey to help you grasp what your employees and other
internal stakeholders think your core competencies are. You may ask questions such as:
What markets do we serve?
What is the best lot size we produce?
What tolerances can we best keep?
Do you see us as a low cost or high-quality supplier?
What material can we work with effectively?
How would you assess the skills of your fellow employees?
Why do customers give us business over our competitors?
It is important to know how your internal stakeholders perceive your company. This way you can see
how their vision compares to that of your external customers.

External Customer Survey

Conducting an external customer survey helps you to understand the perception of your external
customers. Some of the key questions you may ask include:
What type of supplier do you see us as?
Do you come to us primarily because of price or quality?
What is the most value-added process we supply your company?
What current/future products do you see us best suited to manufacture for your company?
What machine capabilities do you assume we have? Wish we had?

Competitive
Analysis

Customer
Feedback

Documentation
& Records

Focus
Groups

Industry
Trends

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Employees

3-Year Plan

Surveys

Communicate to Your Employees

Once you have gathered all of your information, conducted an analysis and developed a three-year
plan, it is time to share the information with your employees. All of this information will have a direct
impact on their future, and you will want to gain employee buy in early on to ensure the success of
your lean efforts.
Effective communication will require some planning. What content do you want to present, and in
what form? You will also need to anticipate some of the tough questions that may come up so you
can prepare for them. You may even want to plant seed questions in the audience. Also take the time
to identify any employees that may be either positive or negative towards your plan. You need to
encourage allies and determine how to enroll those who are resistant.

The Kick-Off Meeting

Your initial presentation to the employees should contain some key elements, including:
What did your company learn from the development of the three-year plan?
Why is the company undertaking a lean initiative?
What is the timeline for the lean process?
What time and type of input is important from ALL employees?
Assure employees that the outcome will be positive for the company and them directly
(WIIFM) (Whats in it for me?)
Announce the lean team

Covering all of these bases is important. Your presentation of the findings of your research and the key
elements of your three-year plan should all come together to convince the employees of the importance
of your goals, and how they can help achieve them. It is also important for them to understand the
benefit to themselves, or WIIFM (Whats in it for me?). Once they understand all of this, you can
announce the key players on your lean team, and get to work on implementing the plan.

Benchmarking and Networking

The last step in the preparation phase of your journey should involve benchmarking and networking
with your peers and other shops in your market space. This will help you gain practical information and
ideas that you can apply directly to your shop. You will learn some things that WONT work, and you
can gain insight into the resistance and issues faced by other shops during their lean implementations.
Joining professional associations in your industry is an excellent way to accomplish this. Membership
will likely gain you access to a wealth of information and statistics you can use for benchmarking, and
it will give you a venue to exchange ideas with your peers. Developing a best practice implementation
of lean will be an ongoing process, and benchmarking and networking will help you with that journey.

Section II: Sustaining a Lean Program in the Shop

Many of the go-to tools for developing a lean program in a manufacturing environment are not practical
for the average job shop. Many of them were designed for environments where annual production
volumes are much greater than your high mix, low volume shop.
Tools like Value Stream Maps (VSM) and spaghetti diagrams are wonderful when you only use a few
different parts, but imagine attempting to map every part number that you have produced in the last
year. Custom, make-to-order work often means that you manufacture thousands of parts numbers
annually.
VSM assumes you have a relatively steady production cycle and that you have an average workload
with few if any peaks and valley or bottlenecks. Conversely, your shop likely experiences peaks and
valleys and bottlenecks that shift from month to month or even week to week.

Develop an Alternative to Value Stream Mapping

In a job shop environment, it is NOT practical to value stream map or spaghetti diagram EVERY single
part number. Instead, try to look for consistency across your parts list. Look for patterns. Are there
high-ticket parts that are actually repeaters or are there parts that do have some level of consistency to
them in terms of manufacturing flow?
Hopefully, many of you have an ERP or shop floor management system in place that you can pull this
data from, or export it to an application like Microsoft Excel. In this way, you can leverage the data
quickly and easily to determine the flow of those parts that are repeaters.

Develop Part Families

In your search for consistencies, you will want to evaluate the primary operation(s) that the parts flow
through, what type of material is used in production and whether the parts are alike in terms of size or
shape.
With that information in hand, you can then focus on those part families that have the highest
contribution to your MARGIN (not just revenue). Then determine whether these parts have similar
routings, and analyze the flow of these parts through your shop.
Once you understand the flow of these high contribution part families, you can then focus on doing a
process map for the part family. This information can change due to the nature of your job shop, so you
will want to regularly monitor to see if these repeaters or mix of parts you produce changes.

Eliminate Unnecessary Parts

Determining your repeating part families will also allow you to clear out parts that are disruptive to the
flow of work through your shop. You want to look for parts that are outside of your core competencies,
the ones you manufacture for customers simply to keep them happy. You will usually find that these
parts are the ones where the tolerances are difficult to keep, the material is harder to work with, or you
have a difficult time meeting the customers delivery requirements.
Either outsourcing these parts or helping your customer source from another supplier will often yield
significant benefits. Higher profit margins overall, reduced employee frustration and improved morale,
improving your on-time performance, freeing up your capacity for better customers and for producing
parts more in line with your core competencies all of these often result from cutting out certain low
volume parts.

Design Your First Lean Cell

With an understanding of what part families you work with most often, and a focus on the parts that
are more in line with your core competencies, you can start to focus your efforts on improving flow.
You can work on designing your first lean cell, and perhaps move away from your traditional functional
shop layout.

Using a cellular approach to manufacturing your repeaters will require you to group together machines
based on the families of parts produced. Advantages to this approach are numerous. Material flow is
improved including reductions in distance travelled by materials, employees and cumulative lead
times. A cell can focus on setup reduction, and workers can often become multifunctional.
Individual employees in a cell can begin to own quality improvements, waste reduction and simple
machine maintenance. The cell becomes self-balancing and lead times are reduced. Cells can enable
your shop to manufacture high-quality products at a low cost, on time and in a flexible way.

Methodology for Implementing the First Lean Cell

When implementing your first manufacturing cell, you want to gather your lean team to assist in this
process. They can help you select the part family, and review the manufacturing process including
material required, programming, machines and other processes. Then you can select the area of the
shop, and work out your first layout on paper. During this stage, you will want to ensure there is
enough room for tool storage as close to the point of usage as possible.
Once all is worked out on paper, you should then actually lay out the paper patterns of the equipment
and tool storage locations before moving your equipment to look for any other improvements or
ensure that you have accounted for the entire physical space requirements. Then, when you have
determined the final layout for the cell, you can create a timeline and begin actual equipment
movement and configuration. When all of the equipment and tool storage is in place, run actual jobs
through the cell and measure the results.
Do you see improvement in efficiency? Do you see reduction in setup times across the part family?
Do you see higher quality parts produced with fewer scrap or rework issues?
If you are not satisfied with the results,
tweak the cellular layout and try again.
Continue to work on this first cell until
you achieve your desired results.

Redesign the Rest of the Shop

This first cell should allow you to gain a
general understanding of how to approach
the rest of your shop. Look again at your
part families and determine what area you want to tackle next. Just make sure you avoid running
different part families through the same cell if you can avoid it.
Take your entire shop and lay it down on paper. This allows you to analyze how machines are
specifically arranged. Does the arrangement make sense, or can you improve it to facilitate more cells?
As shops grow and you purchase new machines, layouts tend to lose their order. Now is the time to
tighten things back up.

Consider things like where the material for cells or departments is stored, and whether those areas
are easily accessible to machine operators. Where are parts evaluated for quality? Are the personnel
responsible for inspection near the final production area?
All of this will depend on what cells you can create based on parts families, and the physical limitations
of your space. Trial and error may be necessary. However, even taking the time to put machines in a
logical direction all facing the same way in line with incoming material can result in noticeable
improvements.

Running Cells as Profit Centers

Once you have the layout down and your cells created, you can begin to focus on your individual cells
and departments look at running them as profit centers. Making a profit is not enough, you need to
know how that profit is made, and what part families contributed most to that profit.
Implementing your lean initiatives will allow you to begin looking at your cells and departments from
a true cost standpoint. Understanding what a part is costing allows you to isolate problem areas and
make improvements.

Real-time Data Collection

Real-time data collection, ideally through data collection devices right at the machine tool location,
will give you the most up-to-date information on the profitability of your parts and consequently the
profitability of each of your cells. Employees can log all progress immediately. Deploying computer
workstations or tablets the employee can even view all documents related to a job right on the screen.
This powerful information gathering ability can help you eliminate waste and identify problem areas
immediately.

Strive for Zero Waste

Now you can cultivate a zero waste culture. You should regularly promote waste reduction kaizen events
and isolate where waste occurs. Look at these eight types of waste diligently:
Correction Doing work over again because they were not done right the first time. You can help
eliminate this by ensuring that up-to-date instructions and drawings are available at all times to all
applicable employees.
Overproduction Too many parts are produced or are produced too quickly, often to cover up
inefficiencies or compensate for future shortages. One piece flow is often NOT practical for a job shop,
however using a shop floor management system that can determine the optimal flow can eliminate this
type of waste.
Overprocessing Work that does not add value or exceed quality requirements, often through forced
quality checks to correct mistakes after they occur. Correct problems at the source to eliminate.

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Conveyance Moving stock long distances or back and forth email authorizations. Better floor layouts
and communication systems can help correct this.
Inventory Keeping unnecessary inventory on hand costs money. Tools in a shop floor management
system can also ensure only what is needed is kept in stock at the time that is required. Leveraging
your shop floor management scheduling system can help you manage the optimal inventory levels to
maintain.

Motion Of people, equipment, machines and tooling. Once you determine your cell arrangements,
you should regularly do motion studies to determine any adjustments necessary to ensure maximum
efficiency of motion.
Waiting On paperwork, equipment or decisions. Shop floor management systems can minimize
or eliminate the waste of waiting when operators know exactly which jobs to run next in real time.
Overburden Overextension of capacity. This is dangerous physically, mentally and operationally.
Scheduling tools should allow you to avoid this and warn you when it is about to occur.
Unevenness The hurry up and wait problem. Scheduling tools let you see where issues will arise
before they happen, and you can adjust accordingly.
Human Mind Missing out on process improvements through inadequate communication. Allow
your employees to contribute their thoughts regularly. Even 5-minute daily huddles are often enough
to gather important ideas for improvement.

An Ongoing Effort
Sustaining a lean manufacturing environment on the shop floor requires constant tweaking and
diligence over the first few years. With the right leadership, however, and commitment from internal
stakeholders, it is possible.

Section III: Implementing a Lean Initiative in the Office

While lean was originally designed for the manufacturing floor, you can also apply its principles to
your office as well. More businesses are coming to see the advantages of lean in an office setting, with
even the federal government launching lean initiatives to combat waste.

The Challenge
Implementing lean initiatives in an office presents certain unique challenges. Offices often have little
or no definition of quality, and little measurement of cost. It is often difficult to measure productivity,
and in the standard job shop, office staff is usually limited to only a few individuals.

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Office workers usually learn their jobs from those that came before, with little opportunity for cross
training, and the variety of tasks and lack of hard deadlines makes the concept of process control
ludicrous.
There is also no empirical data on the success of lean initiative in office environments. This makes
going through the effort and cost of implementing them a tough sale to many shop owners.

Still Worth Doing

Even with all of this, lean is still worth attempting in an office. By becoming as lean as possible, shops
can gain an edge on their competitors. As lean principles have to be adapted for the shop, they can
also be adapted to the office.

Lets look at some lean processes that can help in the office.
Automated Workflow
It is a common occurrence in the office for information to become lost. A buyer calls and talks to his
sales rep about an order. The sales rep emails the shop foreman. The foreman misses the email. The
buyer calls the next day to check on the change, but the sales rep is out for the day. The process starts
all over, to the frustration of everyone.
An automated workflow or business process management system can help to eliminate much of this.
By setting up communications requirements in an electronic workflow system, the lack of visibility,
lack of standardized process and lack of integration of data can all be eliminated. Anyone with access
to the system can see the entire flow, from call to final product, at a glance.
According to a 2007 report by the Aberdeen Group, 82% of best in class manufacturers are more
likely to have visibility into the status of ALL processes from quote to cash. Standard operating
procedures supported by electronic workflow give you this visibility.
A comprehensive system like this improves the communication of all staff, both office and
shop, improves the flow of work, reduces costs, and allows you to work on continuous process
improvements. It also enforces accountability and compliancy, bringing the office in line with the
rest of the company.

Business Activity Management (BAM)

BAM systems allow you to move to the next level of business process management and efficiency.
When certain events happen (or do not happen), a business activity monitoring system can isolate
those events and cause an action to be triggered based on that event.
It could allow you to automatically:

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Know when your staff has overdue activities

Notify a client when a shipment is delayed
Know when a clients receivables are too high
Send order confirmations
Know when a clients credit status changes
Know when a quote or discount is about to expire
Know when stock is nearing its re-order level
Know when a prospect isnt contacted in x days

Using both automated workflow and BAM, you can bring applicable aspects of lean into your office,
and tighten up the operations of both your office and shop at the same time.

Conclusion
Even job shops characterized with a high mix of parts produced in relatively low volumes can use
lean to make the shop more profitable and more competitive. It may take some adaptation, and it
will certainly take careful planning and follow through, but it can be done. Remember these four
key points to ensure the ongoing success of your lean culture.
#1: Your lean goals must be attainable. Lofty goals are great, but your goals must be attainable
to avoid discouraging your employees and dooming your project to failure. Set achievable weekly,
monthly and yearly objectives.
#2: EVERYONE at EVERY level of the organization must be in the know about your lean
initiative and its intended results. Write your goal down and give it to someone outside of the
company. If it is understandable to someone outside, then you can work on communicating to the
company.
#3: Establish metrics and measures. Before implementation, determine what these measure will
be, how often they will be updated and communicate your results to the entire company.
#4: Make the goals real to your company. Show employees what is in it for them.
Ultimately, your lean journey will be unique to your company. Resources such as this business
guide should be viewed as general guidelines, which mean you must adapt them to your specific
circumstances. Form a plan unique to your company, involve your stakeholders and keep the
big picture in mind. When you do your preparation, layout the right plan, and are diligent about
maintaining a lean culture, you can truly reap the benefits of leaneven in a high mix, low volume
job shop environment.

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