Cost and time index for lean implementation

In this model, the costs of lean implementation are included in the form of operating cost, investment cost, and variable cost. Time of lean implementation is included in the form of planning time for lean implementation, modification time of the exiting process, training time required for the updated system, and validation time for the new production process.

Finally, this model provides the maximized perceived value of reducing a manufacturing waste within the given cost and time constraints by using optimization technique.

Operating cost index

Operating costs of implementing a lean strategy consists of equipment handling cost, maintenance cost (preventive maintenance, cost of unscheduled repairs, required parts and accessories), utilities cost, and labour cost. The total operating cost of a lean strategy implementation depends on the complexity of the existing manufacturing operations and the level of lean strategy implementation.

If L_i is the representation of ith lean strategy for reducing a particular manufacturing waste and

i

P C

1 is the required operating cost of this lean tool

implementation; then the operating cost of lean strategy implementation in the existing system can be expressed as:

∑

n P iC _i L

1 1 (4.4)

If one lean strategy implementation causes forced changes to the others then the amount of extra cost incurred can be expressed as;

∑ ∑

n n O j iL C ij L 1 1 2 (4.5)

When ith and jth strategies are coupled in such a way that implementation of ith strategy forces a change in jth strategy, the resulting extra cost is

ij O

C

2 and this is the

operating cost due to the impact ofL_j.

Therefore, the total operating cost of the manufacturing process can be calculated as summation of operating cost without lean implementation, operating cost due to lean implementation and operating cost of forced changes due to lean

∑ ∑

∑

+ + = n n O j i n O i Oi LC i L L C ij C 1 1 1 1 2 0 (4.6)

Subject to L_i and Lj = 1 or 0 (integer, strategy implemented or not).

The objective of this analysis is to maximize the perceived value within limited amount of cost.

Investment cost index

Reliable manufacturing equipment is a basic requirement for successful lean implementation (Bachamada, 1999). Investment costs include capital cost, cost of tools, cost of accessories, and cost of fixtures to implement a lean strategy (Eswaramoorthi et al., 2010). Investment in cost of change depends on the complexity of the modification required in the existing manufacturing process to implement a lean strategy and the level of lean strategy implementation.

If L is the representation of i_i th lean strategy for reducing a manufacturing waste and

i

I C

1 is the investment cost required for implementing the i

th

strategy; then the investment cost of the intended change of the existing system can be expressed as;

∑

n I iC i L 1 1 (4.7)

Therefore, the total investment cost to a production process can be calculated as the summation of the cost of investment without lean implementation, cost of investment due to lean implementation, and cost of unexpected change due to lean implementation.

∑ ∑

∑

+ + = n n I j i n I i I_i LC _i LL C _ij C _{1 1 1} 2 1 0 (4.8) where ij I C

2 is the investment cost due to forced changes in Lj

When ith and jth strategies are coupled in such a way that implementation of ith strategy forces a change in jth strategy, resulting in extra investment cost as

ij I

C

2 and

this is due to the impact of L_j Variable cost index

Variable expenses are those costs which vary proportionally with the volume of units produced. Variable costs are a direct function of production volume, rising

whenever production expands and falls during its contracts. Examples of common variable costs include: raw materials, packaging, and labour directly involved in a company's manufacturing process. This research considers that the variable cost of lean implementation depends on the level of complexity of the manufacturing operations, level of change required to the existing system, level of lean strategy implementation, and the volume of production. When

i

v V

1 is variable cost, v(i)is

production volume, and L is the representation of i_i th lean strategy, then change in variable cost index can be calculated as;

∑

n v iV i L i v 1 ( ) 1 (4.9)

Total variable cost index of a production process can be calculated as;

∑ ∑

∑

+ + = n n v j i n v i v_i v i LV _i v j L L V _ij V _{1 1 1} 2 1 0 () ( ) (4.10) where ij v V

2 is the variable cost due to forced changes in .

When ith and jth strategies are coupled in such a way that implementation of ith strategy forces a change in jth strategy, resulting in an extra variable cost

ij v

V

2 towards

the total variable cost due to the impact of L_j.

Planning time index

Implementation of lean techniques or strategies in the existing system requires planning from the top management before implementation. Several planning activities are required to put in practice a new improvement strategy such as planning for development of functional requirements, facilities development, planning for implementation process and procedures. Therefore, extra planning time is necessary to accomplish a lean project. Planning consists of preparation and design stage of lean implementation (Anvari, et al., 2011). Preparation is the first stage of any lean implementation project. In this stage, manufacturers establish the foundation of lean implementation, set the lean goal and build the implementation team (Allen, et al., 2001a). The common steps of preparation includes: gap assessment, understanding waste, establishing the objectives, getting the organizational structure right, finding a change agent, creating an implementation team, suppliers and customers involved, recognizing the need for change. The design stage of lean implementation project analysis the current state and planning of the implementation projects take place. The

design stage includes: mapping the value streams; analysing the business for improvement opportunities; planning the changes; identifying indicators to measure performance; creating a feedback mechanism.

If L_i is the representation of ith lean strategy for reducing a certain manufacturing waste and

i

P T

1 is the required planning time for this lean strategy

implementation; then the total planning time required for implementing n strategies and upgrading the existing manufacturing system;

∑

n P iT _i L

1 1 (4.11)

If one lean strategy implementation forces changes to the others, then extra planning time is required to take appropriate measure for the forced changes and can be expressed as;

∑ ∑

n n P j iL T ij L 1 1 2 (4.12)

If ith and jth strategies are closely linked strategies, therefore the implementation of ith strategy forces a change in jth strategy, which results in extra amount of planning time denoted by

ij P

T

2 . The extra amount of planning time is the

result of the impact of lean strategy,L_j

Therefore, total planning time for a production process can be expressed as the summation of planning time required for an existing manufacturing process without lean implementation, planning time required for a manufacturing process due to lean implementation, and planning time required for unexpected change due to implementing a lean strategy, L_j

∑ ∑

∑

+ + = n n P j i n P i P_i LT _i L L T _ij T _{1 1 1} 2 1 0 (4.13) where i P T

0 is the planning time required for a production process without

implementing any lean strategy

Training time index

Training is an important issue for the successful implementation of a lean strategy (Wan & Chen, 2009; Anvari, et al., 2010). Wan & Chen (2009) state that a high level of knowledge and useful experience is needed to identify the appropriate lean tools. Managers and practitioners should learn how to get started, where to start

and how to proceed, in addition to knowing the available tools. Replication of lean strategies from others is not a practical way of developing a lean manufacturing system. In most cases, copying lean strategies from others lead to failure and unsatisfactory results because that lean strategy is not applicable to that specific manufacturing process. Therefore, proper knowledge about lean strategy is a very important part of successful implementation of lean strategies in any organization (Allen, et al., 2001a). Several authors emphasize training of people and standardizing work before implementing lean strategies (Huang, 2009; Anvari, et al., 2011). Therefore, time is required for training personnel about a specific lean strategy, its relation to specific waste reduction, its implementation process, its maintenance process, and its operation.

If L_i is the representation of ith lean strategy for the improvement of any particular manufacturing waste and

i

T T

1 is the required training time to teach

operators about this particular lean strategy; then the total training time required for operator to implement a lean strategy can be expressed as;

∑

n T iT _i L

1 1 (4.14)

If one lean strategy implementation forces changes to other tools or part of the existing manufacturing process, then the amount of time needed to train operators to fix the unexpected situation can be expressed as;

∑ ∑

n n T j iL T _ij L 1 1 2 (4.15)

When ith and jth strategies are coupled in such a way that implementation of ith strategy forces a change in jth strategy and these forced changes result in extra training time

ij T

T

2 . The extra training time is the impact of lean strategyLj.

Therefore, total training time to improve a production process can be expressed as the summation of training time required for existing manufacturing process without implementing a lean strategy, training time required for manufacturing process due to lean implementation, and training time required for handling an unexpected situation due to lean implementation

∑ ∑

∑

+ + = n n T j i n T i T_i LT _i LL T _ij T _{1 1 1} 2 1 0 (4.16)

Modification time index

Modification time is the time required to modify the existing system to implement the selected lean strategies. The majority of the lean researchers acknowledged that the transformation process to a lean production system requires a lot of effort not only in the shop-floor level but also in the company culture and organizational structure.

If L is the representation of i_i th lean strategy for the improvement of a certain manufacturing waste and

i

M T

1 is the required modification time for this lean strategy

implementation; then the total time required to modify the existing system due to the

implementation of n strategies is;

∑

n M iT _i L

1 1 (4.17)

If one lean strategy implementation forces changes to the others then the extra time needed can be expressed as;

∑ ∑

n n M j iL T _ij L 1 1 2 (4.18)

If ith and jth strategies are closely linked strategies and the implementation of ith strategy forces a change in jth strategy, the result is extra modification time denoted by

ij M

T

2 . The extra modification time is the result of the impact of lean strategyLj.

Therefore, total modification time to improve a production process can be expressed as the addition of modification time required for a normal production process, extra modification time required due to lean implementation, and modification time required for unexpected change due to lean implementation;

∑ ∑

∑

+ + = n n M j i n M i M_i LT _i L L T _ij T _{1 1 1} 2 1 0 (4.19) where j M T

0 is the modification time required for a manufacturing process

without implementing any lean strategy

Validation time index

After implementing any lean strategy, the process needs to be validated before going to final production to reduce the risk of increased waste and reduced cost (Miller et al., 2010). It is also required to provide evidence that equipment, items or systems have a direct, indirect or no impact on the product quality due to change in

the existing system for lean implementation. Moreover, validation proofs that systems are effective and comply with regulatory requirements. Therefore, it needs extra time to validate the process during lean implementation which affects the total manufacturing lead time. Total validation time can be expressed similarly as planning, modification and training time. Therefore, the total validation time can be expressed as;

∑ ∑

∑

+ + = n n V j i n V i V_i LT _i L L T _ij T _{1 1 1} 2 1 0 (4.20) where i V T

0 = Validation time required for a manufacturing process without lean

implementation i

V T

1 = Validation time required for a manufacturing process due to lean

implementation ij V

T

2 = Validation time required for handling unexpected situation due to lean

implementation

In document A systematic approach for selecting lean strategies and assessing leanness in manufacturing organizations (Page 81-87)