Summary_Sheet_lyst4389_240522_102717

Summary Sheet
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Lean system and Innovation
Email – hello@edutap.co.in, M – 8146207241 1|P a g e http://www.edutap.co.in

1 Introduction
Lean system and innovation under cost accounting are two concepts that are closely related
to the efficient management of resources in business operations.
Lean system and innovation under cost accounting can help companies create a
competitive advantage by reducing waste, improving efficiency, and developing new
products and services that meet the changing needs of consumers.
1.1 What does lean mean?

‘Lean’ is a way to do more and more with less and less - less human effort, less equipment,
less time, and less space - while coming closer and closer to providing customers exactly
what they want.
It relies on 3 very simple ideas:

1. Deliver value from your customer’s perspective
2. Eliminate waste (things that don’t bring value to the product)
3. Continuous improvement
‘Lean system’ is where the philosophy of lean is applied in various processes.
It all started with lean manufacturing, where the aim was to minimize wastage and make
the production process efficient and afterwards this concept of lean was applied to various
other fields for the purpose of optimization. Thus, the term lean system came to be used as
a generic term where the concept of lean was applied to different fields to collectively gain
optimization.
1.2 Pillars of lean system

Two main pillars of the Lean methodology are:
1. Respect for people

2. Continuous improvements
2 Lean Manufacturing
Lean manufacturing or lean production is basically a concept that came into existence
because of Toyota Production System (TPS) which was based on Taylor’s Views that there
should be continuous Improvement and workers should be given incentives for the same.
This concept was discovered by Ohno Taiichi. The aim of TPS was-
• Less Wastage
• Less Resources
• Higher Productivity
• Lower Cost
• Lower Cycle Time
As we can see that TPS lays down the same objectives as lean system and thus, it was later
renamed as ‘Lean Manufacturing’ by John Krafcik.
In Lean production, the concept of "less wastage" is of utmost importance, this refers to
the systematic elimination of any activity or process that does not add value to the
customer. Waste is any activity or process that consumes resources but does not create
value or meet customer needs. Therefore, the goal of Lean production is to identify and
eliminate waste, thereby reducing costs, improving quality, and increasing efficiency.
Types of Waste:-
1. Overproduction- that means the organization is producing more than what is required
in the market which will lead to additional cost of stocking and also the possibility of
selling such stock at discounts later, which will lead to reduction in profit ultimately.

2. Waiting (time on hand)- this can happen in case of machinery, where one machinery
takes more time to convert the product for the next step of production which will lead
to increase in costs because such stock will need to be maintained.
3. Unnecessary transport or conveyance- it arises mainly due to inefficient planning where

suppose you are to transport a product to the same place but instead of planning it well
and sending it in optimum quantity in one truck you are making use of multiple trucks
multiple times.
4. Incorrect processing- this means that proper process that should be followed while
production is not being adhered to.
5. Excess inventory- it is the cost of maintaining extra stock that is not yet sold in the
market.
6. Motion- it is the extra cost arising due to excess of motion that machinery might have to
do.
7. Defects- this is the inability to offer standardized quality of products to the customers.
8. Delegating Tasks with lack of Training- which will lead to inefficient working an
increased cost.
9. Less Participation from workers on ideas- this is the lack of feedback that the
employees might give which may have helped the organization to function better.
10. Underutilization of skills- this happens when employees are not given the work
according to their expertise and skills which they can offer.
There is another approach for looking at the types of wastage. This can be categorized as-
1. Muda
2. Mura
3. Muri
Muda means wastefulness, uselessness and futility, which is contradicting value-addition.
For example- you are manufacturing a phone but the value-addition you are doing is giving
7 years of warranty on battery but this is of no use because technological advancement is
such that customer tend to change their phone on an average every 3 years.
Types of Waste (MUDA)-

1. Overproduction
2. Waiting (time on hand)
3. Unnecessary transport or conveyance
4. Incorrect processing
5. Excess inventory
6. Motion
7. Defects
Mura means- unevenness, non-uniformity, and irregularity. Mura is the reason for the
existence of any of the seven wastes. In other words, Mura drives and leads to Muda. For
example, in a manufacturing line, products need to pass through several workstations
during the assembly process. When the capacity of one station is greater than the other
stations, you will see an accumulation of waste in the form of overproduction, waiting, etc.
Muri means overburden, beyond one’s power, excessiveness. An example of Muri is

putting a machine under undue strain by expecting it to produce more and faster than it is
capable of. It also applies to putting employees under pressure to work longer, harder, or
faster than they physically can.
Muda, Mura, and Muri are interrelated. Eliminating one of them will affect the other two.
For example, a firm that needs to transport 6 tons of materials to a customer has several
options which are being depicted in the following diagram-
2.1 Principles of Lean Manufacturing

(A) Identify Value:
1. A company needs to add value defined by its customers’ needs.

2. The value lies in the problem you are trying to solve for the customer for your
customer is actively willing to pay
3. Any other activity or process that doesn’t bring value to the end product is
considered waste.
(B) Value Stream Mapping: It must include all actions and people involved in the process of
delivering the end product to the customer. By doing so, you will be able to identify what
parts of the process bring no value.
(C) Create Flow: Developing a product/service will often include a cross-functional

teamwork. Bottlenecks and interruptions may appear at any time.
However, by breaking up work into smaller batches and visualizing the workflow, you will
able to easily detect and remove process roadblocks.
(D) Create a Pull System: In such a system the work is pulled only if there is a demand for it.
This lets you optimize resources’ capacity and deliver products/services only if there is an
actual need. This basically means that when the necessary order or demand is created then
only manufacturing should be done. Unnecessary Production when there is no demand on
the market will lead to losses.
(E) Continuous Improvement (Perfection): Problems may occur at any of the previous
steps. Therefore you need to make sure that employees on every level are involved in
continuously improving the process.
3 Tools of Lean System

In terms of Tools the main pillars are-
1. JIT - As the name implies, Just in Time (JIT) is a management philosophy that calls for
the production of what the customer wants, when they want it, in the quantities
requested, and where they want it, without being held in inventory.
Instead of stockpiling large quantities of what you believe the customer might want,
only produce what the customer requests when they request it. This allows you to
focus your resources on only completing what you will be paid for rather than
building for stock.

2. Jidoka- Reduces Waste though
controlling Defects. This
concept's goal is to free
equipment from the need for
constant human attention, to
separate people from
machines, and to allow
workers to staff multiple
operations.
JIDOKA allows the machine

operator to stop the flow line,
preventing defective pieces
from moving to the next
station.
And the base for these two pillars is-
Stability and standardization- Provides stability through basic hygiene standards and
continuous improvement. Visual management and the 5S system are the foundations of
stability. 5S promotes standardized work and Total Productive Maintenance (TPM), both of
which are critical to method and machine stability.
Finally, 5S promotes just-in-time (JIT) production by providing decision-making information

at the point of use.
3.1 5S in Lean Systems

5S is one of the basic building blocks of Lean Manufacturing and one of the first lean tools
that you will start your implementation with.
This originated at Toyota as part of TPM. 5S is a simple tool for organizing your workplace in
a clean, efficient and safe manner to enhance your productivity, visual management and to
ensure the introduction of standardized working.
(1) Sort (Seiri): Sort, Clearing, Classify
According to Seiri, employees should sort out and organize things well.
Label the items as “Necessary”, ”Critical”, ”Most Important”, “Not needed now”, “Useless
and so on. Throw what all is useless..

(2) Straighten (Seiton): Straighten, Simplify, Set in order, Configure
Now, the organization is left with essential items. Seition means to Organize.
Research says that employees waste half of their precious time searching for items and
important documents. Every item should have its own space and must be kept at its place
only.
(3) Shine (Seiso): Sweep, shine, Scrub, Clean and Check
Shine here refers to maintaining cleanliness in the workplace. It creates a positive work
environment for the employees.
(4) Standardize (Seiketsu): Standardize, stabilize, Conformity
The problem is, when 5S is new at a company, it's easy to clean and get organize and then
slowly let things slide back to the way they were. SEIKETSU refers to Standardization. Every
organization needs to have certain standard rules and set policies to ensure everything
done in first 3 steps gets converted into habits .
(5) Sustain (Shitsuke): Sustain, self discipline
It means self-discipline. Employees need to respect organization’s policies and adhere to

rules and regulations. Self discipline is essential
6th S – Safety
Some companies like to include a sixth S in their 5S program: Safety. When safety is
included, the system is often called 6S. The Safety step involves focusing on what can be
done to eliminate risks in work processes by arranging things in certain ways.
3.1.1 5S and Visual Communication

Seiton and seiso can be achieved through Visual Communication. Visual communication
tools such as labels, floor markings, cabinet and shelf markings, and shadow boards can
make navigating spaces even simple. Therefore, if any organization has clear and good
visual communication, it becomes easier to achieve 5S.
3.1.2 CANDO
This is a concept which is same as 5S. When some American companies tried to
incorporate 5S, they changed the terminologies so that they would not be accused of
imitating Japan and therefore CANDO was introduced-

3.2 Kaizen
What is Kaizen Costing?
Kaizen is a Japanese word which means ‘change for better’ which ultimately leads to
continuous improvement. Its main aim is to reduce costs even below standard costs and for
this small-small changes are introduced leading to innovations rather than big changes.
Its earlier application was in Manufacturing Stage, but now it is applied everywhere.
What is Kaizen?
Idea of Kaizen Originated From One of the 14 Principles of Dr. Deming. So according to the
5th Principle given by Dr. Deming Improvement must be constant and forever so that there
is improvement in quality and productivity, and thus there is gradual decrease in costs. Mr.
Deming visited Japan after the World war and from his visit Japan adopted the idea of
Kaizen.
3.2.1 Types of Kaizen

In Asset-specific kaizen all improvement activities are related to reduction of use of chosen
asset or resource. It would involve identifying areas for improvement related to these
assets and implementing changes to enhance their performance, efficiency, reliability, or
lifespan.
The goal of asset-specific kaizen would be to optimize the utilization and effectiveness of
the organization's assets, leading to improved productivity, reduced downtime, cost
savings, and better overall operational performance. Example: Reducing Electricity
Consumption in Office in all departments.
In product-specific kaizen improvement activities are related to different resources related

to one product. This involves applying Kaizen principles to improve the design, features, or

quality of a specific product. It could involve gathering feedback from customers,
conducting product tests, and making iterative improvements based on the insights gained.
Example: Reducing Cost of Washing Machine by reducing consumption of all resources
Types of Costs to be Reduced in Kaizen(major examples):-
• Working with suppliers to reduce costs in supply chain

• Waste in Manufacturing Process
• Recruitment and training costs (more effective methods of training)
• Disposal
• Cost of acquiring a patent, license, registration fees, hiring of chartered accountant
and all other legal formalities require kaizen costing
• Redesigning of any product
• Marketing, sales and distribution
What does Kaizen seek to achieve?
Its main objective is to reduce costs, but it achieves this objective through eliminating
problems associated with the wastes inherent within our processes.
3.2.2 Principles of Kaizen Costing

1. Lays no emphasis on the present existing situation, it starts afresh and therefore it
does not have biases from the past experiences.
2. The system does not strive for perfection, rather seeking gradual improvements in
the existing situation, at an acceptable cost as it believes in gradual changes through
stable efforts.
3. It encourages collective decision—making, i.e. the ideas of many are better than that
of one single person, and so the shared responsibility is achieved.
4. There are no limits to the level of improvements that can be implemented, but these
should be consistently followed.
5. Kaizen involves setting standards and then continually improving these standards to
achieve long-term sustainable improvements.
3.2.3 Kaizen Process

1. Involve You Employees: The participation of employees and their feedback helps in
generating ideas and information. It also eliminates the resistance to change from their
side.
2. Find Problems: The organization together with its employees of all the departments
(such as customer support, finance, human resource, production, design, etc.), needs
to find out the various problems in the organization with the help of techniques like
360-degree feedback.
3. Think and Find Solutions: The next step is solving the identified problems. This step
needs a lot of brainstorming and tactical approach; therefore, managers form a team
of ingenious employees to find out a practical solution to each question.
4. Implement at smaller Level: Implementing any change involves cost and risk
simultaneously. Therefore to be on a safer side, the new idea must be testified on a
small part of the organization.
5. Check: The managers need to look after the proper implementation of the kaizen
costing at smaller level. The learning’s must be noted.
6. Standardize: After being satisfied with the results, the organization needs to set this
change as a standard procedure for all the departments and across the whole
organization.
7. Repeat: A standardized procedure becomes the organizational culture when
continuously practiced over a period
3.2.4 Advantages of Kaizen Costing

3.2.5 Drawbacks of Kaizen
3.2.6 Tools for Kaizen

There are major 5 tools of kaizen-
1. 5S (discussed earlier in the chapter)
2. TPM (to be discussed later in the chapter)
3. Value Stream Mapping (discussed earlier in the chapter)
4. PDCA - This is the Plan, Do, Check, Act method
5. Quality Circles
3.2.7 PDCA
Plan: In this initial step, the goal is to plan and establish objectives for improvement. It
involves identifying and defining the problem or opportunity for improvement.
Do: The "Do" step involves implementing the plan and carrying out the actions defined in
the planning phase. Key activities include executing the planned actions or changes. It
emphasizes on collecting data and information during the implementation process.
Check: In this step, the focus is on evaluating the results and comparing them against the
goals and expectations. Key activities include analyzing the collected data to assess the
outcomes and performance and comparing the actual results with the expected targets.
Act: The "Act" step involves taking corrective actions and implementing necessary changes
based on the findings from the "Check" step. Key activities include deciding on the
appropriate adjustments or modifications to address any identified issues or shortcomings.

Once the "Act" step is completed, the PDCA cycle starts again, creating a continuous
improvement loop. The cycle encourages organizations to strive for ongoing enhancement
by applying the knowledge gained from each iteration to subsequent cycles.
The PDCA cycle is iterative, meaning that after completing one cycle, the process begins
again with planning for the next improvement.
3.2.8 Quality Circles

A quality circle is a participatory management technique that enlists the help of employees
in solving problems related to their own jobs.
For example- Let's say there is a manufacturing company that produces electronic devices.
The company establishes a quality circle comprising employees from different departments,
such as production, quality control, and design.
Circles are formed of employees who meet at intervals to discuss problems of quality and
to devise solutions for improvements. The quality circle continues to meet regularly to
identify new problems, brainstorm solutions, and drive continuous improvement efforts.
They learn from their experiences, share best practices, and strive for ongoing
enhancement of product quality and process efficiency.
Difference b/w Kaizen and Standard Costing
In summary, kaizen focuses on continuous improvement by involving employees and

making incremental changes, while standard costing is a cost accounting method that sets
predetermined standards for costs and analyzes variances. Kaizen has a broader application
and is a long-term approach, while standard costing is primarily used for cost control and
performance evaluation in the short term.
3.3 TQM – Total Quality Management

Total quality management is an organization-wide philosophy with its core values centered
on continually improving the quality of its product and services, and the quality of its
processes, to meet and exceed customer expectations

TQM seeks to achieve quality by establishing a quality management system, setting quality
standards, and implementing processes to meet those standards. It also involves ongoing
measurement and analysis of performance data to drive improvement.
Kaizen, on the other hand, is a specific methodology that focuses on continuous

incremental improvements in processes, products, and services.
Therefore, TQM is a broader management philosophy that encompasses various principles

and practices to achieve overall quality, while Kaizen is a specific methodology for
continuous improvement that emphasizes small, continuous changes.
3.3.1 6 Cs of TQM
Commitment: If a TQM culture is to be developed, total commitment must come from top
management.
Culture: Training lies at the center of effecting a change in culture and attitudes. Negative
perceptions must be changed to encourage individual contributions and to make ‘quality’ a
normal part of everyone’s job.

Continuous improvement: TQM should be recognized as a ‘continuous process’. It is not a
‘one-time programme.
Co-operation: TQM visualizes Total Employee Involvement (TEI).
Customer Focus: The needs of customers shall be the focus.
Control: Unless control procedures are in place, improvements cannot be monitored and
measured, nor deficiencies corrected.
3.4 TPM – Total Productive Maintenance

TPM aims at improving the reliability and efficiencies of our equipment and machines.
TPM (Total Productive Maintenance) is a comprehensive approach to equipment

maintenance and productivity improvement. It aims to maximize the effectiveness and
efficiency of machines by involving all employees in their care.
It seeks to improve the OEE (Overall equipment effectiveness). The overriding objective of
TPM is the elimination of LOSSES. TPM focuses on proactive maintenance, operator
involvement, and continuous improvement to minimize equipment breakdowns, improve
availability, and optimize overall equipment effectiveness (OEE). It integrates maintenance
activities with production processes to achieve higher productivity, quality, and safety.
Seiichi Nakajima is regarded as the father of TPM. Total Productive Maintenance as we

know it today was developed at a company called Nippondenso (an important supplier of
Toyota.)
6 big losses that are tracked under TPM are-

1. Breakdowns
2. Setup and Adjustment losses
3. Start-up losses
4. Idling and minor stoppages
5. Reduced Speed
6. Defects and rework
Measurement of OEE -> Availability x Performance x Quality,

3.4.1 8 Pillars of TPM
Pillar 1: Autonomous Maintenance: Operators monitor the condition of their own

equipment and work areas.
Pillar 2: Process & Machine Improvement: Team leaders collect information from
operators and work areas then prioritize preventative maintenance and improvements.
Pillar 3: Preventative Maintenance: Preventative maintenance tasks and schedules are

shared by operators and team leaders.
Pillar 4: Early Management of New Equipment: Based on maintenance reports, team

leaders anticipate and plan for parts of new equipment (Predictive Maintenance).
Therefore, preventive maintenance is based on predefined schedules and activities, while

predictive maintenance utilizes data analysis to predict and address maintenance needs
based on the actual condition of the equipment. Preventive maintenance aims to prevent
failures, while predictive maintenance aims to anticipate and prevent failures before they
occur, optimizing maintenance efforts and reducing costs.
Pillar 5: Process Quality Management: Shared responsibility for operation and

maintenance encourages quality improvement ideas from all work areas.

Pillar 6: Administrative Work: Managers prioritize data from the previous pillars and share
outcomes with team leaders and work areas.
Pillar 7: Education & Training: Continuous improvement includes operator and work area
education and training which improve morale, retention, and efficiency.
Pillar 8: Safety & Sustained Success: Facility-wide safety is prioritized which positively
impacts sustained success of the TPM program.
The Three Goals of TPM:

1. Zero unplanned failures
2. Zero product defects
3. Zero accidents
Benefits of effective TPM include the following:

1. Safer Working Environment
2. Improved Equipment Reliability - Uptime
3. Increased Capacity
4. Increased Productivity
5. Improved Quality
6. Company Financial Performance and Job Security
3.5 Just In Time (JIT)

Just in Time (JIT), as the name suggests, is a management philosophy that calls to produce
1. What the customer wants and how much quantity
2. When they want it
3. Where they want it

Instead of producing in mass and
thinking customer would want it, you
only make exactly what the customer
ask for, when they ask for it. This allows
you to concentrate your resources on
what is being paid for. No unnecessary
stock of inventory and finished goods.
JIT helps in reducing inventory levels by

eliminating excess stock and relying on a
pull-based system where items are
produced or ordered only when there is
actual demand. This leads to lower
holding costs, reduced storage space
requirements, and improved cash flow.
JIT can also benefit by reducing various

costs associated with inventory, storage, overproduction, defects, and inefficient processes.
By eliminating waste and improving efficiency, organizations can achieve cost savings and
improve their overall financial performance.
3.5.1 Advantages of JIT

3.5.2 How Can you Implement JIT
1. Reliable Equipment and Machines: You cannot afford delays with JIT because it
focuses on producing and delivering goods or services at the precise moment they
are needed, minimizing waste and maximizing efficiency.
2. Quality Improvements by workers themselves through Kaizen: An empowered
workforce that is tasked with tackling their own quality problems with all the
support that they need is another vital part of any lean and JIT implementation.
Setting up kaizen or quality improvement teams and using quality tools to identify
and solve problems is vital: You cannot afford delays with JIT
3. Well designed work cells though 5S: Poor layout, unclear flow, and a host of other
issues can all be cleared up by the implementation of 5S within your production.
Such clear-cut instructions and working processes ensure efficiency in the
production.
4. Pull Production: The inventory is pulled as per demand from the customer and not
pushed to create which is not ordered. The pull is implemented through KANBANS
which are signals (flags) to tell the previous process what needs to be made

For example, a production worker at the assembly line notices that there are only a few
engine components left in the inventory. The worker retrieves a Kanban card that is specific
to the engine components from a designated location, often a Kanban board or rack. The
worker fills out the necessary information on the Kanban card, such as the part number,
quantity needed, and location of the inventory.
The Kanban card acts as a visual signal to trigger the replenishment process. It indicates to
the materials or logistics department that more engine components need to be produced or
obtained from the supplier. Upon seeing the Kanban card, the materials or logistics
department retrieves the bin, acknowledges the request, and replenishes the engine
components to the specified quantity.
For some time now KABAN Cards are replaced by electronic systems due to technological
advancements that have taken place in the economy worldwide.
Toyota has formulated six rules for the application of kanban-
1. Each process issues requests (kanban) to its suppliers when it consumes its
supplies. When a Kanban card is received or encountered, it triggers the necessary
action for material replenishment, production, or movement.
2. Each process produces according to the quantity and sequence of incoming

requests. This rule ensures that production is aligned with demand and avoids
excessive stock levels.
3. No items are made or transported without a request. This helps prevent

overproduction and waste.
4. The request associated with an item is always attached to it. It ensures that
production is based on actual demand, with items produced or replenished only
when there is a Kanban signal.
5. Processes must not send out defective items, to ensure that the finished products
will be defect-free. This includes identifying and addressing bottlenecks, reducing
waste, improving quality, and striving for overall process optimization.
6. Higher number of pending requests makes the process more sensitive and reveals
inefficiencies (limited Kaban cards shall be active at one instance).
Meeting TAKT Time :

Takt time is the rate at which a finished product needs to be completed in order to meet
customer demand
By aligning production with takt time, organizations can achieve a steady and efficient
production flow, optimize resources, and meet customer expectations without unnecessary
waste or delays. It serves as a key performance indicator for planning production activities,
establishing work cycles, and managing capacity in a lean and demand-driven manner.
This must be met otherwise there will be delays. This is implemented using hejiunkna.
Hejiunkna: It deals in leveling the volume and type of Production
Example of leveling the volume- say a hat producer receives orders for 500 of the same hat
per week: 200 orders on Monday, 100 on Tuesday, 50 on Wednesday, 100 on Thursday, and
50 on Friday.
If he does not use Heijunkna then he will work more on Monday and less Wednesday and
so on. On Mondays, workers spend overtime to meet the spike in demand and so
businesses incur additional costs. On Wednesdays and Fridays when demand is low,
workers would have idle time.
Instead of trying to meet demand in sequence of the orders, the hat producer would
use heijunka to level demand by producing an inventory of 100 hats near shipping to fulfill
Monday’s orders. Every Monday, 100 hats will be in inventory
Now, if we want to level the type of production we use heijunkna box after some brain
storming of the requirements that the production process needs. It looks something like
this-

Each square on the board represents a kanban to signal production of one product at
mentioned quantity. Leveling the type and volume of production will help in meeting the
TAKT time.
Heijunkna helps us achieve:-
Predictability: Heijunka aims to balance production by smoothing out variations in demand.

This helps organizations predict and plan their production capacity more accurately, leading
to reliable delivery times and consistent customer satisfaction.
Flexibility: By implementing Heijunka, organizations can respond more effectively to

changes in customer demand or market conditions. The leveled production schedule allows
for easier adjustment and allocation of resources, making it easier to accommodate
fluctuations in product mix and volume.
Stability: Heijunka promotes stability in production processes by reducing waste and

variability. It helps eliminate overproduction, uneven workloads, and unnecessary
inventory. By maintaining a steady and balanced production flow, Heijunka minimizes
disruptions and bottlenecks, resulting in smoother operations and increased overall
stability.

3.5.3 Cellular Manufacturing
Cellular Manufacturing is based on principle of group technology which was invented by

Flanders in 1925.
The principle of group technology is to divide the manufacturing facility into

small groups or cells of machines. This division into small cells of machines is called Cellular
manufacturing.
In cellular manufacturing, equipment and workstations are arranged in a U-shape sequence

that supports a smooth flow of materials and components through the process, with
minimal transport or delay.
Overall, cellular manufacturing focuses on creating small, self-contained units that optimize
flow, minimize waste, and increase flexibility. In contrast, batch production revolves around
processing products in larger batches, which may result in longer lead times and less
flexibility.

An organization must often replace large, high volume production machines with small,
flexible, "right-sized" machines to fit well in the cell because the batch size is small.
It helps to shift to another product type within short time without wastage of time in
equipment change over or in setting up machines. Single-minute exchange of die (SMED)
enables an organization to quickly convert a machine or process to produce a different
product type.
Each worker is expected to have mastered a full range of operating skills required by his or
her/his cell. Therefore, systematic job rotation and training are necessary conditions for
effective cell development because this worker needs to train in a way that job rotation
could be possible.
4M in Cellular Manufacturing
1. Man : Operators are cross‐trained on various machines in the cell

2. Material: Material flow in the cell is streamlined to minimize travel distance
3. Machine: The layout of the cell arranges equipment to be immediately adjacent,
permitting smooth material flow
4. Method: Method associated eliminates waste. The most apparent waste
is defective parts which can be caught early
3.6 JIDOKA
Jidoka was also invented as part of TPS at Toyota. It is the process of providing machines
and operators the ability to detect when an abnormal condition has occurred and
immediately stop work.
Jidoka highlights the causes of problems because work stops immediately when a problem
first occurs. This leads to improvements in the processes that build in quality by eliminating
the root causes of defects.
Jidoka sometimes is called autonomation, meaning automation with human intelligence.

This is because it gives equipment the ability to distinguish good parts from bad
autonomously, without being monitored by an operator.
3.6.1 Principles of Jidoka

The principle of Jidoka can be broken down into a few simple steps;
1. Discover an abnormality
2. STOP
3. Fix the immediate problem
4. Investigate and correct root cause
3.6.2 How can you implement Jidoka
Line Stop: Every individual in a lean company such as Toyota has the authority, in fact the
requirement to stop the process should they discover an abnormality. For this purpose,
workers are empowered to find such errors or defects so that they could be paid due
attention.
Some people fear that this would lead loss of productivity but in real sense through jidoka
we don’t just stop the process, we highlight the problem, correct it and then tackle root
cause to prevent the problem ever happening again.
Poka-Yoke: A poka-yoke device is one that prevents incorrect parts from being made or
assembled, or easily identifies a flaw or error. It is also known as Mistake Proofing. For
example: if a three pin plug is being produced then a poka-yoke to test if it fits or not should
be used at the end of the produce to test if it fits well or not.
Andon: Andon is a Japanese term meaning “light” or “lamp.” In Lean manufacturing, an

andon refers to a tool that is used to inform and alarm workers of problems within their
production process
Autonomation: Automatic ability to detect defect by the machine without any human
intervention
3.7 What is Back Flush Accounting

Backflush accounting is a manufacturing accounting system where the costing of a product
and the inventory consumed is calculated at the point of completion of the manufacturing
process. Backflush accounting is a simplified cost accounting method that eliminates the
need for recording individual transactions or costs at each step of the production process.

Instead, it waits until the completion of a production run or the sale of finished goods to
record the associated costs.
In backflush accounting, the cost of production is "flushed" or directly allocated to the

finished goods inventory or cost of goods sold without explicitly tracking the costs of
individual components or intermediate stages of production. It relies on predetermined
standard costs or standard labor and material usage to calculate the cost of the finished
goods. This method is often used in settings with high-volume repetitive manufacturing
processes.
This approach has the advantage of avoiding all manual assignments of costs to products
during the various production stages, thereby eliminating many transactions and the
associated labor.
4 Six Sigma
Six Sigma (6σ) is a set of techniques and tools for process improvement.
Engineer Bill Smith introduced Six Sigma while working at Motorola in. Six Sigma became
well known after Jack Welch made it a focus of his business strategy at General Electric in,
and today it is widely used in many sectors of industry.

It is quality improvement technique whose objective to eliminate defects in any aspect
that affects customer satisfaction. The premise of Six Sigma is that by measuring defects in
a process, a company can develop ways to eliminate them and practically achieve "zero
defects".
The benchmark set by six sigma is 99.99966% of the Products are defect free or 3.4
defects per million.
4.1 Doctrine of Six Sigma

1. Continuous efforts to achieve stable and predictable results through decrease of defects
and errors in a timely manner and also learning from such errors.
2. Manufacturing and business processes have characteristics that can be defined,

measured, analyzed, improved, and controlled (DMAIC – we will study further)
3. Commitment for Top Level Management to induce conformity and adherence to the
standards set by the organization.
4. A clear focus on achieving measurable and quantifiable financial returns.
5. Decisions based on verifiable data and statistical methods, rather than assumptions and
guesswork.

4.2 Difference between Six Sigma and Lean Systems
Differences:-
Lean focuses on eliminating waste, improving flow, and optimizing processes to enhance
efficiency and value delivery which shortens the cycle time. Six Sigma aims to reduce
variation and defects, using statistical analysis and structured problem-solving
methodologies which improves process capability.
Lean focuses on process improvement through waste reduction, while Six Sigma focuses on
quality improvement through defect reduction.
Similarities:-
Both Lean and Six Sigma promote a culture of continuous improvement. They encourage
organizations to continually seek opportunities for process optimization, waste reduction,
and quality enhancement. Both methodologies emphasize the importance of ongoing
monitoring, measurement, and refinement of processes.
Both Lean and Six Sigma methodologies emphasize understanding customer needs and
delivering value to customers. They strive to improve customer satisfaction by eliminating
defects, reducing waste, and enhancing overall process performance.

4.3 Lean Six Sigma
When the concept of lean and six sigma are combined it is termed as lean six sigma.
Lean traditionally focuses on the elimination of all kinds of waste but in the lean, there is
not much focus on limiting the number of defects. And therefore, through six sigma
combined with lean one can achieve the objective of identifying and eliminating the
defects.
Lean exposes sources of process variation and Six Sigma aims to reduce that variation
resulting in perfect scenario. So, when lean and six sigma is combined we get a perfect
combination wherein not only waste is being reduced during the production process, but
also identification of defects is done in a timely manner.
4.4 Six Sigma Methodologies

There are mainly two most important methods under Six sigma in the production process
which are DMAIC and DMADV.
4.4.1 DMAIC
Define the process improvement goals that are consistent with customer demands. For
example, if a customer complaints about slow processing of his phone, this would become
as the target to reduce such delays.
Measure the current process and collect relevant data for future comparison. For example-
measuring how much time is taken to open a particular application in that phone which was
processing slow.
Analyze the problem which needs to be addressed. For example- finding out the cause for
the slow processing and why these certain apps are not able to be opened in a timely
manner.
Improve or optimize the process based upon the analysis using techniques like Design of
Experiments. For example, updating such apps which are causing the delay.
Control-to ensure that any variances are corrected before they result in defects. For
example, tracking such apps in future so that the same delay does not occur again.
This is used for projects aimed at improving an existing business process.
4.4.2 DMADV
Define design goals that are consistent with customer demands and the enterprise strategy.
Measure and identify CTQs (characteristics that are Critical To Quality)
Analyze to develop and design alternatives
Design an improved alternative, best suited per analysis in the previous step
Verify the design, set up pilot runs, implement the production process and hand it over to
the process owner(s).
Used for projects aimed at creating new product or process designs.
Six Sigma projects follow two project methodologies inspired by Deming’s Plan–Do–
Check–Act Cycle.
Both DMAIC and DMADV methodologies within Six Sigma emphasize data-driven
decision-making, continuous improvement, and the systematic problem-solving approach
advocated by the PDCA cycle. They provide a structured framework to guide Six Sigma
practitioners in achieving process improvements and meeting customer expectations.

4.5 Key Roles Required in Six Sigma
Executive Leadership includes CEO and other key top management team members. They
are responsible for setting up a vision for Six Sigma implementation. They set goals and
priorities, ensure alignment with strategic objectives, and champion continuous
improvement efforts.
Champions are responsible for the Six Sigma implementation across the organization in an
integrated manner. They identify improvement opportunities, select project leaders, and
provide necessary resources and support to project teams.
Master Black Belts, identified by champions, act as in-house expert coaches for the
organization on Six Sigma. They devote 100% of their time to Six Sigma. Master Black Belts
are highly experienced and skilled individuals responsible for overseeing multiple Six Sigma
projects.
Black Belts operate under Master Black Belts to apply Six Sigma methodology to specific
projects. They also devote 100% of their time to Six Sigma. Black Belts lead and manage
complex improvement projects, train Green Belts, and work closely with teams to achieve
project goals and deliver sustainable results.
Green Belts are the employees who take up Six Sigma implementation along with their
other job responsibilities, operating under the guidance of Black Belts. Green Belts work
under the guidance of Black Belts and may lead smaller-scale projects within their
functional areas.
Yellow Belts, for employees that have basic training in Six Sigma tools and generally
participate in projects. They collaborate with the project team, provide insights and data,
and help validate improvement ideas. SMEs contribute their subject matter knowledge to
ensure effective problem-solving and implementation.
4.6 Six Sigma and Standard Deviation
Now we need to understand why six sigma is known as “six” sigma. We can understand it
with the help of above diagram where each purple line from the centre to the respective
end indicated the deviations that occur, and as we can see these deviations are six in
number. Organizations operate within the Six sigma as it is considered as a standard
amount of deviation as compared to, let’s say, one or two sigma because it is very less and
is practically impossible for such organization to operate within this narrow window.
The more number of standard deviations between process average and acceptable
process limits fits, the less likely that the process performs beyond the acceptable process
limits. The industry has accepted Six sigma as a level which is attainable and beneficial.
5 Business Process Re-engineering

Its main two objectives are-
• Focuses on the analysis and design of workflows and business processes within an
organization.
• The whole process in reinvented rather than sub-process

This is opposite from Kaizen, because Kaizen emphasizes continuous incremental
improvements in small steps. It involves making small changes and adjustments to existing
processes, with a focus on optimizing efficiency, eliminating waste, and improving quality.
Business process re-engineering, on the other hand, involves a radical and fundamental
redesign of processes. It aims to achieve significant improvements by rethinking and
reengineering the entire process from scratch.
Aims for this concept are:

1. Improve customer service
2. Cut operational costs
3. Become world-class competitors
4. Reduce time to market
5. Increase productivity
6. Improve quality and Customer Satisfaction
The founder of the Business Process Reengineering concept is Michael Hammer. He was of
the view that “Don’t Automate, Obliterate” because according to him the major challenge
for managers is to obliterate forms of work and reinvent the various business processes in a
manner that would suit the current environment and do not add value, rather than using
technology for automating it. Therefore, he emphasized that first priority should be given
to reinvent rather than automating.

Six Pillars of BPR
Business Process Reengineering (BPR) is a management approach aimed at transforming

and improving processes within an organization. The six pillars of BPR provide a framework
for successful process redesign. By focusing on these six pillars, organizations can effectively
plan, execute, and sustain the transformational changes brought about by Business Process
Reengineering.
Factors Important for Success of BPR

1. Business needs analysis : Needs should be analyzed Properly in relation with what
customer wants.
2. Organization wide commitment : Commitment from all the stakeholder is necessary
3. BPR team composition: The right team composition with talented people
4. Adequate IT infrastructure: Proper IT Infra and Support to drive the change
5. Effective change management: Change is always opposed, it needs to be smoothly
integrated into the company
6. Ongoing continuous improvement
Principles of BPR
1. Organize around outcomes, not tasks because it may so happen that certain tasks
are not required for a particular outcome to take place and therefore focusing on
tasks rather than an outcome would be a mistake.
2. Information processing should be included in the work, by the entity which produces
the information.

3. Geographically dispersed resources should be treated, as if they are centralized to
organize them properly.
4. Parallel activities should be linked because they also have some linkages.
5. Doers should be allowed to be self-managing, there is no need to micro-manage the
people who are experts in their particular processes.
6. Information should be captured once at source because if this is not done it might
lead to unauthentic information or simply a rumor that has not been validated or
derived from the correct source.
7. Process must have clear cut ownership so that the responsibility and accountability
could be established properly.
The concept of BPR has pioneered in implementing the concept of BPR, along with various
other companies like IBM, Walmart, Sony, Citibank, etc.
Difference between BPR and Lean

Lean, which involves small, incremental steps towards gradual improvement, re-
engineering involves a giant leap
It has been described as taking a blank piece of paper and starting from scratch to redesign
a business process. Rather than searching continually for minute improvement,
reengineering involves a radical shift in thinking. Re-engineering involves high risk and big
rewards whereas lean involves less risk and less rewards in a specific period.

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Summary Sheet

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1.1 What does lean mean?

It relies on 3 very simple ideas:

‘Lean system’ is where the philosophy of lean is applied in various processes.

1.2 Pillars of lean system

1. Respect for people

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3. Unnecessary transport or conveyance- it arises mainly due to inefficient planning where

Types of Waste (MUDA)-

Muri means overburden, beyond one’s power, excessiveness. An example of Muri is

2.1 Principles of Lean Manufacturing

1. A company needs to add value defined by its customers’ needs.

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(C) Create Flow: Developing a product/service will often include a cross-functional

3 Tools of Lean System

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JIDOKA allows the machine

And the base for these two pillars is-

Finally, 5S promotes just-in-time (JIT) production by providing decision-making information

3.1 5S in Lean Systems

(1) Sort (Seiri): Sort, Clearing, Classify

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(3) Shine (Seiso): Sweep, shine, Scrub, Clean and Check

(4) Standardize (Seiketsu): Standardize, stabilize, Conformity

(5) Sustain (Shitsuke): Sustain, self discipline

It means self-discipline. Employees need to respect organization’s policies and adhere to

3.1.1 5S and Visual Communication

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3.2.1 Types of Kaizen

In product-specific kaizen improvement activities are related to different resources related

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Example: Reducing Cost of Washing Machine by reducing consumption of all resources

Types of Costs to be Reduced in Kaizen(major examples):-

• Working with suppliers to reduce costs in supply chain

What does Kaizen seek to achieve?

3.2.2 Principles of Kaizen Costing

3.2.3 Kaizen Process

3.2.4 Advantages of Kaizen Costing

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3.2.6 Tools for Kaizen

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3.2.8 Quality Circles

Difference b/w Kaizen and Standard Costing

In summary, kaizen focuses on continuous improvement by involving employees and

3.3 TQM – Total Quality Management

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Kaizen, on the other hand, is a specific methodology that focuses on continuous

Therefore, TQM is a broader management philosophy that encompasses various principles

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Co-operation: TQM visualizes Total Employee Involvement (TEI).

Customer Focus: The needs of customers shall be the focus.

3.4 TPM – Total Productive Maintenance

TPM (Total Productive Maintenance) is a comprehensive approach to equipment

Seiichi Nakajima is regarded as the father of TPM. Total Productive Maintenance as we

6 big losses that are tracked under TPM are-

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Pillar 1: Autonomous Maintenance: Operators monitor the condition of their own

Pillar 3: Preventative Maintenance: Preventative maintenance tasks and schedules are

Pillar 4: Early Management of New Equipment: Based on maintenance reports, team

Therefore, preventive maintenance is based on predefined schedules and activities, while

Pillar 5: Process Quality Management: Shared responsibility for operation and

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The Three Goals of TPM: