A report on Kaizen A report on Kaizen LessonsLessons

Our past cultureOur past culture

Our current lessonsOur current lessons

Our future cultureOur future culture

A management perspective of Uniparts Olsen Inc. Kaizen

October 30, 2007October 30, 2007

This presentation reflects ourThis presentation reflects ouractivities and behavior activities and behavior

changeschangesas a result of a kaizen as a result of a kaizen

implementation facilitated by:implementation facilitated by:

Toyota Material Handling Toyota Material Handling CompanyCompany

The Raymond CorporationThe Raymond Corporation

October 30, 2007October 30, 2007

A report on Kaizen A report on Kaizen LessonsLessons

Presented by:Presented by:

Mark DawsonMark Dawson

Global Operations DirectorGlobal Operations Director

Brad MillerBrad Miller

Plant ManagerPlant Manager

Uniparts Olsen Inc. has been on a successful lean manufacturing journey for eight years

Throughout these years we felt something was missing in the process

We have realized large gains

The gains have been key in assuring our viability

Injury Reductions Injury Reductions Historical Injury Frequency

(2007-2008 is fiscal year all others are calendar year)

10.9

14.6

10.18.7

7.2

13.712.7

6.5

2.3

2.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

-200

8

Injuries per 100K Shop

Hours

84% reduction1999 to present

Reject ReductionsReject ReductionsHistorical Rejects PPM at Final Inspection

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Ja

n-0

3

Ap

r-0

3

Ju

l-0

3

Oc

t-0

3

Ja

n-0

4

Ap

r-0

4

Ju

l-0

4

Oc

t-0

4

Ja

n-0

5

Ap

r-0

5

Ju

l-0

5

Oc

t-0

5

Ja

n-0

6

Ap

r-0

6

Ju

l-0

6

Oc

t-0

6

Ja

n-0

7

Ap

r-0

7

Ju

l-0

7

95% reduction

August 2003 to present

Scrap ReductionsScrap Reductions

Historical Scrap $ as a Percentage of Sales

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2.25%

2.50%

2.75%

3.00%

3.25%

3.50%

May

-03

Au

g-0

3

No

v-03

Feb

-04

May

-04

Au

g-0

4

No

v-04

Feb

-05

May

-05

Au

g-0

5

No

v-05

Feb

-06

May

-06

Au

g-0

6

No

v-06

Feb

-07

May

-07

Au

g-0

7

61% reduction

August 2003 to present

Rework ReductionsRework Reductions

Historical Rework Hours per Million Production Hours

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Fe

b-9

8J

un

-98

Oc

t-9

8F

eb

-99

Ju

n-9

9O

ct-

99

Fe

b-0

0J

un

-00

Oc

t-0

0F

eb

-01

Ju

n-0

1O

ct-

01

Fe

b-0

2J

un

-02

Oc

t-0

2F

eb

-03

Ju

n-0

3O

ct-

03

Fe

b-0

4J

un

-04

Oc

t-0

4F

eb

-05

Ju

n-0

5O

ct-

05

Fe

b-0

6J

un

-06

Oc

t-0

6F

eb

-07

Ju

n-0

7

68% reduction

January 1998 to present

Total Cost of Quality Total Cost of Quality ReductionReduction

Total Cost of Quality as a % of Sales

costs captured: external failure, internal failure, prevention costs, appraisal costs

0.50%

1.50%

2.50%

3.50%

4.50%

5.50%

6.50%

Ju

l-0

4

Se

p-0

4

No

v-0

4

Ja

n-0

5

Ma

r-0

5

Ma

y-0

5

Ju

l-0

5

Se

p-0

5

No

v-0

5

Ja

n-0

6

Ma

r-0

6

Ma

y-0

6

Ju

l-0

6

Se

p-0

6

No

v-0

6

Ja

n-0

7

Ma

r-0

7

Ma

y-0

7

Ju

l-0

7

42% reduction

August 2004 to present

WIP ReductionsWIP Reductions WIP $ as a Percentage of Sales $

30%35%40%45%50%55%60%65%70%75%80%85%90%95%

100%46% reduction

February 2001 to present

Tool Cost ReductionsTool Cost Reductions

Tooling Cost per Operator Hour

$4.00

$4.25

$4.50

$4.75

$5.00

$5.25

$5.50

$5.75

$6.00

$6.25

$6.50

$6.75

Mar

-06

Apr-06

May

-06

Jun-0

6

Jul-06

Aug-

06

Sep

-06

Oct

-06

Nov

-06

Dec

-06

Jan-0

7

Feb-0

7

Mar

-07

Apr-07

May

-07

Jun-0

7

Jul-07

Aug-

07

$ per DirectHour

18% reduction

March 2006 to present

ProductivityProductivity IncreasesIncreases

Direct shop Labor

22% increase

2003 to present

Total Shop Labor

6% increase

2003 to present

Historical Pieces Produced Per Labor Hour

10

12

14

16

18

20

22

24

26

28

Jan-0

3

Apr-03

Jul-0

3

Oct

-03

Jan-0

4

Apr-04

Jul-0

4

Oct

-04

Jan-0

5

Apr-05

Jul-0

5

Oct

-05

Jan-0

6

Apr-06

Jul-0

6

Oct

-06

Jan-0

7

Apr-07

Jul-0

7

Direct Hours Only Direct + Indirect Hours

But…But…

we have always fallen short of reaching world class targets

that approach perfection

We never fully sustain the lean tools

and

never realize their full potential

? ?

Here is a snapshot of our past method for implementing lean manufacturing :

1) Study and learn an individual Lean Manufacturing tool (single piece flow cells, set-up reduction, pull scheduling, 5S, etc.)

2) Solid planning

3) Launch the tool on our shop

Past ImplementationsPast Implementations

Straight forward - black and white - remote control from the office

= shop domain where we produce safety, quality, delivery, cost

= lean manufacturing project management

cleaning &

organization

communication

start-up announcement

after- put up posting & “walk away”

very few standards

written & complex

Project implementation

at gemba (35% interaction with the workers)

Management

BLIND in office

Plan (always) Do (always) Check (sometimes) Act (sometimes)

(2% interaction with workers) 98% office meetings with team to insure implementation

Let’s look at 2S as an example!

Great results are the norm …

But they last only

two weeks !two weeks !toto

two months !two months !

The Olsen wayThe Olsen way

Then performance slowly slips to Then performance slowly slips to lower levels lower levels

The Olsen wayThe Olsen way

We blamed them- We blamed them- not us!not us!

The Olsen wayThe Olsen wayWe usually gathered in We usually gathered in approximately 30% of the approximately 30% of the potential gainpotential gain

In management In management conversations we blamed conversations we blamed workers for “pocketing” a workers for “pocketing” a portion of the gains.portion of the gains.

It made their job easier but it It made their job easier but it did not give the company a did not give the company a full improvementfull improvement

Mr. Nomura, Mr. Okada, and Mr. Sakata from Toyota Material Handling Company visited Uniparts Olsen Inc.

They presented slide shows on 2S and quality and explained how the methods work

We were very open to this We were very open to this information. Toyota’s success from information. Toyota’s success from using TPS is unmatched by any other using TPS is unmatched by any other methods in industrymethods in industry

The Toyota WayThe Toyota Way

We studied the information and started implementation after completing our current project load and our ISO triennial audit

Following is what we have implemented & learned thus far in the journey:

The Toyota WayThe Toyota Way

Involvement - colorful - interaction

standards- simple & based around pictures

At gemba with the workers

cleaning &

organization visual

countermeasures Ijo kanri ***

communication

train & retrain until

understood & performing correctly

1) Management is at the machines daily

and operating a system that

constantly reviews gains, problems,

countermeasures, and improvements

2) This system of constant

management and worker involvement insures sustaining

gains and achieving new gains

3) This system creates a hard shell

around the domain of safety, quality,

delivery, and cost. It does not allow the

activities to “slip out” of the

domain

*** ijo kanri = being able to see and quickly taking action to correct any straying from Standard Work.

This is the goal of standardization and visual management.

Continuous waste elimination and problem solving through kaizen are only possible when abnormalities are visible.

Our previous management model Our previous management model had arrows (focus and leadership) had arrows (focus and leadership) from outside of the work areasfrom outside of the work areas

We worked in isolation- disconnectedWe worked in isolation- disconnected

In TPS, the In TPS, the arrows enter into arrows enter into gemba – all are gemba – all are working on working on kaizen where kaizen where safety, quality, safety, quality, delivery, & cost delivery, & cost happenhappen

The arrows were The arrows were not always aimed not always aimed properly due to properly due to inadequate inadequate management management involvement at involvement at the sourcethe source

At the start of the Toyota projects, At the start of the Toyota projects, we were sure it was about learning we were sure it was about learning and applying Toyota methodsand applying Toyota methods

toto thethe shopshop . . . . . .

Instead, the project’s biggest Instead, the project’s biggest impact is on . . .impact is on . . .

Surprise!Surprise!

ManagementManagement

!!

Operator

Supervisor

MaintenanceMaterialHandlers

ProcessEngineers

Support for the value add Support for the value add personperson

The old paradigm

Operator

MaintenanceMaterialHandlers

Managers

QualityEngineers

Purchasing

Controllers

Corporate

SupervisorProcess

Engineers

Support for the value add Support for the value add personperson

Our new paradigm

The methods are simple and yet The methods are simple and yet elegantelegant

Basic facts we have Basic facts we have witnessed through witnessed through implementing TPSimplementing TPS

They have solid philosophical They have solid philosophical and psychological foundationsand psychological foundations

The methods The methods integrateintegrate management management and workers and workers at the processat the process focused focused on common targetson common targets

Our understanding ofOur understanding ofTPS philosophy:TPS philosophy:

The customer’s needs are top priority

Management at the shop floor- always

Involve the workers-respect & implement their ideas

Effective communication of overall company strategic goals and daily area goals

Workers know the goals and understand their contribution to the goals

Our understanding of Our understanding of TPS philosophy:TPS philosophy:

Standardization and visual shop allows ijo kanri

Patiently improve. Make many small gains- over and over- endlessly- continuous improvement

Standardize all gains- once again allowing ijo kanri

Mass improvement becomes Mass improvement becomes visible at the total company visible at the total company level through the level through the accumulation of many small accumulation of many small improvementsimprovements

World class performance will World class performance will be reached in timebe reached in time

The effectThe effect

Scrap reduction 70%Scrap reduction 70%

Employee turnover reduction Employee turnover reduction 100%100%

Production improvement 44%Production improvement 44%

The effectThe effect

This philosophy is opposite US This philosophy is opposite US business culture normsbusiness culture norms

The challengeThe challenge

No quick fixes No quick fixes No big splash and instant gratificationNo big splash and instant gratification

After implementation, US After implementation, US management gravitates to the management gravitates to the workers “being the process” and workers “being the process” and management moves on to new issuesmanagement moves on to new issues

Management involvement is never endingManagement involvement is never ending

How we must thinkHow we must think The journey is endless The journey is endless

We must have faith in our We must have faith in our workers-unleash their minds & workers-unleash their minds & provide motivation to contributeprovide motivation to contribute

TPS is a way of being- it must be TPS is a way of being- it must be part of our human fabric- it is not part of our human fabric- it is not something we can buy and installsomething we can buy and install

TPS requires patience, heart, andTPS requires patience, heart, and huge commitmenthuge commitment

How we must thinkHow we must think Management must provide Management must provide

leadership and always remain leadership and always remain directly involved in kaizendirectly involved in kaizen

Management must go to the floor daily Management must go to the floor daily to review and guide kaizen already in to review and guide kaizen already in place and new kaizen workplace and new kaizen work

Use gemba kanri & ijo kanri structure Use gemba kanri & ijo kanri structure for insuring kaizen sustainsfor insuring kaizen sustains

We must continue to grow in We must continue to grow in our understanding of TPS- our understanding of TPS- this too is an endless this too is an endless journeyjourney

In-depth study of TPS is In-depth study of TPS is essential for all levels of the essential for all levels of the organizationorganization

Future actionsFuture actions

Thank youThank you

for your for your

time and attentiontime and attention