CHAPTER 4  Ensures you have enough products

Capacity, Aggregate, Materials and Resource or ingredients for your deliverables.

2. Workforce capacity planning
 Ensures you have enough team
I. Capacity Planning members and work hours available
to complete jobs
 Defined as the ability to achieve, store 3. Tool capacity planning
or produce  Ensures you have enough tools to
 Capacity would be the ability of a complete jobs
given system to produce output within
the specific time period How to Start Capacity Planning
 In operations, management capacity
1. Measure
is referred as an amount of the input
resources available to produce  First, you’ll need to measure your
relative output over period of time.
resource capacity
 referred as maximum production
capacity 2. Analyze
Capacity planning is essential to be determining  Once you have accurate
optimum utilization of resource and plays an measurements, you can spend time
important role decision-making process.
analyzing this information

Capacity Planning Classification 3. Formulate

 Long range capacity: an  The final step is taking all of the
organization is dependent on various
other capacities like design capacity, information you’ve gathered and
production capacity, sustainable formulating a plan.
capacity and effective capacity.
 Medium Term Capacity: 2 to 3
years of a time frame.
II. Aggregate Planning
 Short Term Capacity: daily weekly
or quarterly time frame.  An organization can finalize its

Goal of Capacity Planning -The ultimate business plans on the

goal of capacity planning is to meet the recommendation of demand forecast
current and future level of the requirement at
a minimal wastage  This process of working out
production requirements for a
The three types of capacity planning
 lead capacity planning medium range.
 lag strategy planning  6 months to 18 months
 match strategy planning

Factors Affecting Capacity Planning- Factors Affecting Aggregate Planning

Effective capacity planning is dependent  Aggregate planning is an operational
upon factors like:
1. Production facility (layout, design, and activity critical to the organization as
location), it looks to balance long-term
2. Product line or matrix,
3. Production technology, strategic planning with short term
4. Human capital (job design, production success
compensation),
5. Operational structure (scheduling, quality
assurance) and
6. External structure (policy, safety
III.Materials and Resource
regulations)
Requirement Planning
The 3 Types of Capacity Planning
 Success of an operation department
1. Product capacity planning
of any organization is dependent
upon an efficient production plan.
 One of the key essential of a The principles underlying the TPS are embodied
production plan is material and in The Toyota Way.
manufacturing planning system.
Material requirement planning plays Before JIT was introduced by Toyota,
a pivotal role in assembly-line most manufacturers kept large amounts of
production. Material requirement inventory available just in case they
planning is a system based approach, needed it. Taiichi Ohno of the Toyota
which organizes all required corporation developed a production
production material. system of ordering parts in small
quantities, based on short-term production
CHAPTER 5 cycles.
LEAN ENTERPRISE
Sakichi Toyoda (1867-1930)
Toyota found that the just-in-time system

Lean enterprise reduced lead time on orders by one third

and reduced production costs by 50
 refers to a production principle
stating that any component of a percent, and the system eventually spread
business enterprise that fails to to many other companies.
directly benefit a final product is
superfluous enterprise that fails to
directly benefit a final product is A just-in-time (JIT) inventory system is a
superfluous management strategy that enables a
 focuses on value creation while
company to receive goods as close as
eliminating waste and non-essential
processes. possible to when they are actually needed.
Sometimes simply referred to as "lean."
Although both terms came into popular usage Here are some of the important effects of a
in the 1990s, the concept itself was devised by
Toyota Motor Corporation when it introduced just-in-time inventory management system:
the Toyota Production System (TPS).

Toyota Production System (TPS) is an Reduces inventory waste

integrated socio-technical system, developed by
Toyota, that comprises its management A just-in-time strategy eliminates
philosophy and practices. overproduction,
The system is a major precursor of the more
generic "lean manufacturing". Taiichi Ohno Decreases warehouse holding cost
and Eiji Toyoda, Japanese industrial Warehousing is expensive, and excess
engineers, developed the system between inventory can double your holding costs.
1948 and 1975.
Gives the manufacturer more control
Kiichiro Toyoda (1894-1952) In a JIT model, the manufacturer has
Originally called "just-in-time production", complete control over the manufacturing
it builds on the approach created by the process, which works on a demand-pull
founder of Toyota, Sakichi Toyoda, his son basis. They can respond to customers’
Kiichiro Toyoda, and the engineer Taiichi Ohno.
needs by quickly increasing the production
for an in-demand product and reducing the 3. Waste of transportation
production for slow-moving items. This
- Transportation waste involves moving
makes the JIT model flexible and able to
inventory, people, tools, or other items
cater to ever-changing market needs.
more often or over farther distances than is
Local sourcing necessary. Excessive movement can lead to
Since just-in-time requires you to start product damage, unnecessary work, and
manufacturing only when an order is exhaustion.

placed, you need to source your raw 4. Waste of processing itself

materials locally as it will be delivered to
your unit much earlier. Also, local sourcing -Over processing simply means doing work
that does not add value to the customer.
reduces the transportation time and cost
Over processing is resolved with
which is involved. simplification. Sometimes, in Lean, we can
Smaller investments stop doing some things instead of figuring
In a JIT model, only essential stocks are out how to do them better.

obtained and therefore less working capital 5. Waste of stock at hand

is needed for finance procurement. The the waste of inventory involves storing
Just-in-time models uses the “right first products or materials that are not needed
time” concept whose meaning is to carry at this time. Excess inventory results in a
out the activities right the first time when waste of space, and it wastes the cost
it’s done, thereby reducing inspection and associated with the physical inventory.
rework costs. Although it is a significant concern in
The main objectives of the TPS are to manufacturing, it occurs in other sectors as
design out: well.
 overburden (muri) and
6.Waste of movement
 inconsistency (mura),
 and to eliminate waste (muda) The waste of motion involves unnecessary
movement of people or items within a work
center. It is often the result of neglecting
There are eight kinds of muda that are the 5s’.
addressed in the TPS:
7.Waste of making defective products
1. Waste of overproduction (largest waste)
This waste is related to the time and
Producing more of a product than can be
materials spent doing something of poor
consumed at the time creates the waste of
quality and later fixing it or scrapping it.This
overproduction.
is the most obvious waste, but
2. Waste of time on hand (waiting)
unfortunately often not recognized until it
Waiting involves customers, patients, or
has already reached your customer
parts sitting idle. Waiting happens when the
person or item is ready for the next step, 8.Waste of underutilized workers the
waste of human potential has joined
but the process is not ready to
their ranks and with good reason. It is
accommodate them. probably the most common and most
 damaging type of waste that continuous improvement is the
organizations encounter. responsibility of every worker, not just a
selected few.
Kaizen can be roughly translated from
Japanese to mean "good change." The
The elimination of waste has come to philosophy behind kaizen is often credited
dominate the thinking of many when
to Dr. W. Edwards Deming. Dr. Demming
they look at the effects of the TPS
because it is the most familiar of the was invited by Japanese industrial leaders
three to implement.
and engineers to help rebuild Japan after
Muda – (eliminate waste) Japanese term World War II. He was honored for his
for production activities that are wasteful
contributions by Emperor Hirohito and the
and do not add value to the goods or
service Japanese Union of Scientists and Engineers.
2.Poka-yoke [poka joke]) is a Japanese
Mura – (Inconsistency) -another waste
present is that associated with the term that means "mistake-proofing" or
unevenness of the processes. "inadvertent error prevention". A poka-
yoke is any mechanism in a process that
Muri – (overburden)- The waste resulting
from overburden or unreasonableness . helps an equipment operator avoid (yokeru)
This type of waste can be reduced by better mistakes (poka) defects by preventing,
standardization of the production correcting, or drawing attention to human
processes.
errors as they occur.
Concept of TPS
3.Kanban -The term 'Kanban' was originally
TPS is grounded on two main conceptual
pillars: conceived by the Japanese car
manufacturer Toyota. It literally means
1. Just-in-time - meaning "Making only
what is needed, only when it is needed, and “visual sign” or “visual card”.
only in the amount that is needed" Back in the 1940s, when Toyota
2. Jidoka - (Autonomation) meaning
"Automation with a human touch" used Kanban for the first time, the cards
were in the form of paper notes pinned on
Industrial Engineering is the wider science
behind TPS. a physical board (Kanban board). Toyota
workers used the kanban card system to
TPS Processes
create a transparent work process and
1.Continuous improvement/Kaizen, also
reduce production waste.
known as continuous improvement, is a
long-term approach to work that Toyota Way – outline
systematically seeks to achieve small, Respect for people
incremental changes in processes in order  Respect (We respect others, make
to improve efficiency and quality. Kaizen every effort to understand each
can be applied to any kind of work, but it is other, take responsibility and do our
perhaps best known for being used in lean best to build mutual trust.)
manufacturing and lean programming. If a  Teamwork (We stimulate personal
work environment practices kaizen, and professional growth, share the
 opportunities of development and Originating from the word for a paper lantern,

maximize individual and team it is a term that refers to an illuminated signal

performance.) notifying others of a problem within the quality-

control or production streams.
Continuously solving root problems drives Activation of the alert – usually by a pull-cord or
organizational learning button – automatically halts production so that

1. Go and see for yourself to a solution can be found. The warning lights are

thoroughly understand the situation incorporated into an easily visible, overhead

signboard, which also identifies the area or
(Genchi Genbutsu,go and see);
specific workstation that has the problem.
2. Make decisions slowly by consensus,
2. Gemba or genba (English: The place where
thoroughly considering all options
the real work is done)
(Nemawashi, building consensus,
This visibility is exploited in order for third-
prior consultation); implement
parties – usually management or section
decisions rapidly; leaders – to conduct regular Gemba Walks in
3. Become a learning organization order to identify areas where potential
through relentless reflection improvements might be made, and to better
(Hansei, acknowledge ones mistake) understand the workload of each associate.

and continuous improvement Walks around the frontline environment of

(Kaizen, 改善). the Genba also ensure that the production

system is correctly adhered to.
Toyota originally began sharing TPS
3. Genchi Genbutsu (English: Go and see for
with its parts suppliers in the 1990s.
yourself)
Because of interest in the program from
The best practice is to go and see the location
other organizations, Toyota began offering
or process where the problem exists in order to
instruction in the methodology to others.
solve the problem quickly and efficiently. To
Toyota has even "donated" its system to grasp problems, confirm the facts and analyse
charities, providing its engineering staff and root causes.
techniques to non-profits in an effort to Closely related to the need to walk the Genba,
increase their efficiency and thus ability to this key principle suggests that to truly

serve people. For example, Toyota assisted understand a situation you need to visit in

the Food Bank For New York City to person. The Toyota Production System requires
a high level of management presence on the
significantly decrease waiting times at soup
factory floor, so that if a problem exists in this
kitchens, packing times at a food
area it should be first of all correctly understood
distribution center, and waiting times in a
before being solved.
food pantry.
4. Hansei (English: Self-reflection)
Other TPS term most commonly used
Even if a task is completed successfully, Toyota
1. Andon is a typical tool to apply the Jidoka
recognises the need for a hansei-kai, or
principle (also referred to as ‘autonomation’),
reflection meeting; a process that helps to
which means the highlighting of a problem, as it
identify failures experienced along the way and
occurs, in order to immediately introduce
create clear plans for future efforts.
countermeasures to prevent re-occurrence.
5. Heijunka (English: Production smoothing)
A levelling technique to facilitate Just-In-Time
(JIT) production and to smooth out production
in all departments, as well as that of suppliers
over a period of time.
A vital technique for reducing waste and
improving production efficiency by leveling
fluctuations in performance within the
assembly line. Fluctuation normally occurs
through either customer demand or within
production itself.
The Toyota Production System
uses Heijunka to solve the former by
assembling a mix of models within each batch,
and ensuring that there is an inventory of
product proportional to the variability in
demand. Furthermore, the disruption of
production flow is minimised by making sure
that components are sequenced to be available
in the right quantity and at the right time, while
changeover periods for vital processes such as
die changes within the steel presses are as short
as possible; often in as little as three minutes.
6. Jidoka (English: automation with human
intelligence)
One of the main principles of the Toyota
Production System, it is the principle of
designing equipment to stop automatically and
to detect and call attention to
problems immediately, whenever they occur
(mechanical jidoka).
In the Toyota Production System, operators are
equipped with the means of stopping
production flow whenever they note anything
suspicious (human jidoka). Jidoka prevents
waste that would result from producing a series
of defective items