Common Tools, Terms & Acronyms used in Lean Management,

Six Sigma, Total Quality Management

& Continuous Improvement Processes

5S - A workplace or environment organisation methodology, which in essence is designed to establish and maintain order and standardisation in the workplace, in order to support efficient working. The name 5S comes from the 5 Japanese words starting with the letter “S” and which describe the stages of the process and which translate into 5 English words, also starting with the letter “S”. 5S is a fundamental core of Lean Manufacturing and Business Engineering's Lean Performance Indicators, provide a structured approach to the application and measurement of 5S.

Sorting ( Seiri )

In this stage of the 5S process, the focus is on removing all unnecessary clutter from the workplace be they tools, parts, paperwork, inventory etc. In essence only materials and tools etc which are essential to perform the work should be present. A Red Tag exercise is commonly used to manage the process of sorting, tagging all unnecessary materials for removal from the workplace and action in a holding area away from the workplace. Refer to Red Tag definition in this web page for further information.

Set In Order or Straightening ( Seiton )

All necessary materials in the workplace should be stored in an orderly and visually controlled environment, with each items location clearly labelled or demarcated. Items should be arranged in a manner that promotes efficient work flow, with equipment used most often being the most easily accessible. Each tool, part, supply, or piece of equipment should be kept close to where it will be used.

Shine or Systematic Cleaning ( Seiso )

The workplace is to be kept tidy and organised with regular cleaning and tidying becoming second nature to staff as a part of their daily cycle and not just at the end of a shift when the work area can have become messy and unorganised.

Standardise ( Seiketsu )

Work practices should be simplified as far as possible, consistent and standardised. All work stations for a particular job should be identical. All employees doing the same job should be able to work in any station with the same tools that are in the same location in every station.

Sustain ( Shitsuke )

Maintain and review the previous 4S's on a continuous basis, ensuring they become the routine method of operation. Maintain the focus on the routine and do not allow things to slip back into the old ways but maintain an ethic of continuous improvement.

5 WHY's - In essence a process of interogating a problem or asking 'why' 5 times until the root cause is defined and can be addressed. While the core assumption is that after 5 levels of interogation the root cause is evident, it may in fact be more or less. In general the root cause analysis will reveal a process which needs to be addressed. For example:

Problem - Customer complaint for late delivery.

Why 1? - We didn't deliver on date promised.

Why 2? - We didn't plan the manufacturing to meet the despatch due date.

Why 3? - We didn't use our planning system.

Why 4? - Because Jim was away sick and no-one else knows how to use it.

Why 5? - Because we dont have multi skilling and backup staff in place.

Root Cause Corrective Action - Implement a multi skilling regime using the structure provided for in Business Engineering's Lean Performance Indicators and train backup staff.

7 BASIC TOOLS OF QUALITY - is a term used to describe a fixed set of graphical tools regarded as being most helpful in analysing quality related issues for those unskilled or unfamiliar with statistics. The seven tools, covered in their own sections on our web page here are:

• Fishbone Diagram or Ishikawa Diagram

• Check Sheet

• Control chart

• Histogram

• Pareto Chart

• Scatter Diagram

• Flow Chart

7 WASTES - A fundamental of Lean Manufacturing is the elimination of waste ( muda ). Initially seven types of waste were identified by Toyota as part of their Total Production System ( TPS ), although an eighth has since been recognised (under utilisation of staff, or put another way, not fully excercising the combined power of your company resources).

Overproduction (in service industries wasted effort) - occurs when more product is manufactured than is required by the customers order. Batch production is a common cause of such waste or muda. Overproduction is generally considered the worst form of waste or muda because it hides and/or generates all the others. Overproduction leads to excess inventory, which then requires the expenditure of resources on storage space and preservation, activities that do not benefit the customer.

Waiting - Whenever goods are waiting and are not being transported or moved, they are not adding value and are in fact costing the business.

Transport - Goods often are transported or moved many times during their life and on each occasion can be damaged or lost. No value is added through transport.

Extra Processing - Often goods are produced using tooling and machinery which is over engineered or more expensive than need be.

Inventory (Raw Materials, WIP and Finished Goods) - All inventory on hand at any stage absorbs cash and reduces cashflow.

Motion - As opposed to transportation, motion refers to the workers and equipment where they are exposed to damage and safety issues and again add no value.

Defects - All defects lead to costs in scrap or rework.

Refer to our web pages on Lean and the respective LPI's covering Reducing Inventory and Eliminating Waste

14 POINTS - William Edwards Deming, credited as the founder of Total Quality Management ( TQM ). introduced his key principles, also known as Deming's 14 Points for management in his book 'Out of the Crisis' The principles can be applied to all businesses large or small and manufacturing or service based.

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.

2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities and take on leadership for change.

3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.

4. End the practice of awarding business on the basis of price tag. Instead, minimise total cost. Move towards a single supplier for any one item, on a long-term relationship of loyalty and trust.

5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

6. Institute training on the job.

7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of an overhaul, as well as supervision of production workers.

8. Drive out fear, so that everyone may work effectively for the company.

9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.

10. Eliminate slogans, exhortations, and targets for the workforce asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

11.a. Eliminate work standards (quotas) on the factory floor. Substitute leadership.

11.b. Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.

12.a. Remove barriers that rob the hourly paid worker of his right to pride in workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.

12.b. Remove barriers that rob people in management and engineering of their right to pride in workmanship. This means, inter alia, abolishment of the annual or merit rating and management by objective.

13. Institute a vigorous program of education and self-improvement.

14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job.


ANDON - A manufacturing term referring to a system to notify management, maintenance, and other workers of a quality or process problem. Typically a signboard incorporating signal lights, alarms or text to indicate which workstation has the problem. Alerts can be activated manually by a worker using a pullcord or button, or may be activated automatically. The system may include a means to stop production so the issue can be corrected.

An Andon system is one of the principal elements of the Jidoka quality control method pioneered by Toyota as part of the Toyota Production System ( TPS ) and now part of Lean management. It gives the worker the ability to stop production when a defect is found, and immediately call for assistance. Common reasons for manual activation of the Andon are part shortage, defect created or found, tool malfunction, or the existence of a safety problem. Work is stopped until a solution has been found.

ANOVA - ANALYSIS OF VARIANCE - is a statistical method used to compare stable normally distributed data, from multiple data sets, to determine if differences exist. Commonly used in the Six Sigma DMAIC methodology (see definition below), an ANOVA is used to determine variation in data set averages or mean and can be manually calculated but is generally software driven. An ANOVA compares the variance within each data set and compares it to the variance within different data sets, enabling us to determine the variation that can be attributed to each factor within the data set/s, along with the common cause variation.


BAKA-YOKE - The Japanese term for ‘foolproofing’ or ‘idiot proofing’. Perhaps considered politically incorrect, the term has been replaced in common use by poka yoke, or ‘mistake proofing.’ The principle of both terms is the same i.e. prevent mistakes rather than correct defects. The subtle difference between baka yoke and poka yoke is that the focus changes from the person (fool or idiot) to the process or action (mistake).

BALANCED PRODUCTION - A lean term, where the production line manufactures product at a rate which matches customer demand or pull. Furthermore each step or station in the production line or process is balanced to ensure there is no waste in the process and that each step or station takes an equal amount of time ( Takt time )

Lean principles demand the elimination of waste and Business Engineering's Lean Performance Indicators, structure provides a systematic approach to Reducing Inventory, Value Analysis, Eliminating Waste & Planning of each facet of this principle, along with an example analysis of Production Line Balance.

BENCHMARKING - Within our sphere of interest, the term refers to the comparison of business processes and performance metrics to industry best practice. Identifying best practice can be difficult, particularly as you drill down into greater detail but in general terms, at a high level, business tends to focus on measuring cost, time and quality when making comparsions to competitors. Various forms of customer surveys, market reviews, competitor product analysis etc can be used to identify best practice.

Business Engineering's Lean Performance Indicators provide a method of benchmarking and tracking improvements towards world class practice or industry best practice, identifying actions required to make continuous improvement toward the targets.

Benchmarking will inevitably involve looking at competitor firms within your own industry but should also consider other industries where similar processes exist and comparing the results and processes of those studied to your own results and processes to learn how well the targets perform and more importantly, how they do it.

Benchmarking should not be a one off exercise but should be an ongoing review process and a part of your continuous improvement programme, the results feeding into company goals and objectives, KPI’s etc.

BOM - BILL OF MATERIAL - a structured hierarchical list of assemblies, sub assemblies, materials and parts used in the manufacture of a particular product. Similar in effect to a cooking recipe. BOM's can be structured in several ways dependent on the end user requirement, the most common being Design BOM's where the parts are structured in a design assembly hierarchy ( see our example here ) and the Production BOM where the parts are structured according to the assembly process or steps.

Bills of Material are core to manufacturing companies and used in a Production BOM format within MRP/ERP systems to drive many facets of the business including parts procurement and pricing, labour costing, planning functions etc...

There are two levels of BOM's - single level and multi or indented level BOM's. The single level BOM simply shows the parent and the next level assembly or parts required to make the product, whereas as multi level BOM as our simple example here shows all assemblies and their children down to bottom level.

As with all documentation you should have strict documented controls around BOM issue and maintenance, along with guidance on such issues as part numbering and issue level conventions, interchangeability ( ICY ) rules etc...

BOM Bill of Material

BRAINSTORMING - A technique of addressing problems through an open group session, where guidelines for the session encourage a completely open forum with no ideas or comments challenged at the outset and simply noted for review and consideration at a later point. The session facilitator will encourage all attendees from all areas of the business to participate and actively contribute, while keeping the session light and informal, or use of structured approaches such as Nominal Group Technique ( NGT ) can be used to encourage participation. Using NGT, the group are all first asked to individually write down their ideas and then in turn the facilitator asks each member to present one idea at a time, circulating around the group until ALL ideas have been presented and recorded. After all ideas have been recorded, any ideas which are the same or similar are grouped, with the consensus of all parties. Everyone is then given a number of votes which are calculated based on the number of ideas (N) i.e. Votes = 1 + N/2. So for example, if there are 40 ideas tabled, then each participant will get 21 votes, which they will then use to rank the ideas from 1, least important, through to 21, the most important in their eyes. All votes are finally tallied and the priority thus set for addressing the range of ideas.


CAUSE AND EFFECT DIAGRAM - see Fishbone Diagram below.

CELL - Cell or Cellular Manufacturing is an integral part of lean manufacturing systems, where machines ore processes are grouped together according to the families of parts produced. The major advantage is that material flow is significantly improved, reducing the distance travelled by materials, inventory and cumulative lead times (reducing waste). Cell based manufacturing is most suitable for batch manufacturing.

Cellular manufacturing arranges factory floor labour into semi-autonomous and multi-skilled teams work cells, who manufacture complete products or complex components. Properly trained and implemented cells are more flexible and responsive than the traditional mass-production line and can manage processes, defects, scheduling, equipment maintenance, and other manufacturing issues more efficiently.

CONCURRENT ENGINEERING - also referred to as Simultaneous Engineering - refer to definition below.

CFM - CONTINUOUS FLOW MANUFACTURING or PRODUCTION - is a manufacturing strategy that produces parts on a Just In Time ( JIT ) or a demand pull basis, often using Kanbans to support production. Typically set up after conducting a thorough Value Stream analysis, to ensure minimal waste and supported with ongoing continuous improvement initiatives, the goal is an optimally balanced production line with single piece flow, little waste, the lowest possible cost, on-time and defect-free production.

CHAKU-CHAKU - A Japanese term for a single piece manufacturing process in which a worker moves with the product from one workstation to the next, operating each machine or process from beginning to the end of the production cycle.

Typically the machines or processes are designed/suited for single piece processing and are jigged for rapid load and use.

CHECK SHEET - one of the 7 Basic Tools of Quality, a Check Sheet or Tally Sheet is a simple but clear and effective means of gathering data at source in accordance with the 3G’s or 3 Reals (see definition below). Usually purpose designed for the information to be captured on a case by case basis, sheets can be used to gather quantitative or qualitative data.

CONCENTRATION DIAGRAM - Used to show the location and frequency of problems or issues, Concentration Diagrams are useful when several people, or groups are collecting data, ensuring that comparable data is recorded for analysis. They are useful when a picture tells the story better than words, as shown in the following examples of a process flowchart showing where the frequency of problems occur, in Tally Chart type fashion and in the second example a painted construction panel showing where the frequency of paint defects occur. Concentration Diagrams do not show the causes of problems or issues at all.

Concentration Diagram Deployment Flowchart Concentration Diagram Panel

CONTINUOUS IMPROVEMENT - in our context, refers to an on-going process of improving products, systems and processes, either incrementally or in large steps but with the emphasis being on continually challenging the status quo and looking for improvement. Continuous improvement is to be encouraged and fostered throughout the business and is no single persons responsibility with all levels and all disciplines in the business seeking improvements.

Continuous improvement is a core principle of Total Quality Management ( TQM ) and is also, in essence, the same principle as Kaizen (refer to Kaizen definition further in this web page), a core principle of the Toyota Production System ( TPS ).

CONTROL CHART - one of The 7 Basic Tools of Quality, is essentially a Run chart with statistically determined upper and lower control limits (often set at +/- 3 standard deviations) of the actual process capability. Typically Run charts are used to monitor the performance of a particular process and to track or highlight when something out of the ordinary is happening or when special causes arise and analysis and corrective action is required to bring the process back into control limits. With experience certain patterns become evident in Control Charts which identify areas for analysis.

There are a range of Control Chart types, who's use is dependent on the data and while we will not dwell on these here, suffice to mention them as being Xbar/R Chart, X/R Chart, np Chart, p chart, c Chart and u Chart.

CORRELATION DIAGRAM - otherwise known as a Scatter Diagram and one of the 7 Basic Tools of Quality, shows the relationship between two sets of variables and can show cause and effect relationships, where action taken on the cause can have a predicatble impact on the effect. Correlation Diagrams can be constructed in Microsoft Excel using the Scatter Diagram format and the best fit line added in using the Trendline function.

correlation Diagram

CTQ - CRITICAL TO QUALITY Tree - is a tool used frequently in Six Sigma to break down broad customer qualitative needs into quantifiable or measurable attributes. The actual Critical to Quality definition is ‘an attribute of a part, assembly, sub-assembly, product, or process that has a direct and significant impact on the customers actual or perceived quality view’.

Success in compiling a CTQ Tree is, as with many of the business improvement tools and processes, dependent on involving all staff across functions in the process and ensuring that the process is drilled down until measurable attributes are identified. When your CTQ Tree is completed ensure you check back with the customer and confirm ( PDCA ) your findings before you act.

CYCLE COUNT - an inventory management process, whereby a part of total stock is counted on a regular set basis.

Cycle counting may be used as means of perpetual stock control as well as or instead of traditional full stock counts on an annual or set basis. Cycle counting regimes tend to cause less disruption to operations, generally negating the need for plant shutdowns. Cycle counts groups and frequency can be set based on a variety of methods, for example stock valuations, with higher value goods checked more frequently or usage where goods turned over more frequently are checked more. Regardless of which the objective should be to check all stock items at least annually.

Many modern ERP systems and warehousing systems support and automate cycle counting regimes.

CYCLE TIME - is not to be confused with Takt Time and is the time taken to complete a step or process in the production process. For example let’s say the production process consists of 3 stages each taking 5 minutes, 4 minutes and 6 minutes respectively, we have 3 different cycle times or a total cycle time of 15 minutes to complete one unit.

Takt time on the other hand is, as defined further on this web page, the time taken to satisfy customer demand or pull. So let’s say in our example, the customer needs or pulls units at a pace of one every 20 minutes, then we are okay as our cycle time supports this. On the other hand if Takt Time was 12 minutes then we have a shortfall and cannot satisfy demand and we will need to work on our Cycle Time. Looking simply at our example, we would first focus on stages 1 and 3 and work to reduce these both to 4 minutes providing us with a balanced production line which meets the required demand pull or Takt Time.


DFM - DESIGN FOR MANUFACTURE - is in its simplest form a process of ensuring that product design is such that optimal efficiency and cost of manufacture can be achieved. DFM requires that all company areas are involved in the process and that there are formal review gates, or points at which product design is signed off. Refer to our web page on the design process from concept to customer ( CTC )

DFSS - DESIGN FOR SIX SIGMA - is, while related to Six Sigma, a separate methodology, focused on determining the requirements of the customers and the business and driving those needs into the product solution created. The DFSS process is often referred to as either Define, Measure, Analyse, Design & Verify ( DMADV - see definition below ) or Identify, Design, Optimise & Validate ( IDOV ).

Tools used to support DFSS ( DMADV or IDOV ) include:

• Quality Function Deployment (see definition below) to translate the Voice of the Customer ( VOC ) into technical specifications and quality control parameters.

• Failure Modes Effects Analysis ( FMEA – see definition below)

• Design of Experiments ( DOE – see definition below)

• Critical to Qulaity Trees ( CTQ Trees - see defintion above)

DMADV - DEFINE, MEASURE, ANALYSE, DESIGN & VERIFY - is a Six Sigma related methodology, sometimes referred to as Design For Six Sigma ( DFSS - see defintion above) that is generally applicable to the design of new products and services but is also used when a DMAIC approach has been used but fails to deliver the expected outcome i.e. it still does not meet customer specifications and expectations. When compared to the DMAIC methodology, usually used for existing processes or services and defined next in this web page, the first three stages of Define, Measure & Analyse are similar and the difference comes thereafter largely in the Design and Verify. DMADV also compares in many respects with the other DFSS methodology of IDOV (see defintion below) :


Define the design goals that are both consistent with your customer’s demands and your own company’s goals.


In this step, four things should be measured including, Critical to Quality characteristics ( CTQ ), production process capability, risk assessments and product capabilities.


Designs must be analysed to determine whether the design is the best available or if an alternative can be created which may be better and will reduce defects.


Design must be optimised to function at its peak and normally this requires verification which is the last step but a plan should be prepared for the last verification step.


Usually involving prototype testing, simulations and pilot runs, verification is the pre cursor to full production.

DMAIC - DEFINE, MEASURE, ANALYSE, IMPROVE & CONTROL - is a Six Sigma methodology for improving an existing process or service. In principle while there are 5 structured and detailed steps within the DMAIC process, they in essence fall within Deming’s approach of Plan/Do/Check/Act ( PDCA ).

A rule that should be applied within any change programme or improvement project but emphasised within Six Sigma and DMAIC, is the need to prioritise and apply valuable resource to projects which can deliver successful high impact outcomes, which in turn build confidence in the process with staff. In essence project selection and priority should be based on a Pareto or 80/20 principle.

The 5 steps of DMAIC are:


There is an old adage that time spent up front preparing is worth every minute and this is true of the Define step of DMAIC. Defining the process and all its inputs and outputs is heavily reliant on both process mapping and Failure Modes Effect Analysis ( FMEA ). A thorough understanding of the process in detail, including all aspects not necessarily anticipated or desired ( referred to sometimes as the Hidden Factory ) is critical and ensures that all waste is identified. The Define step must:

• Identify or refine the problems that are to be solved in order to meet or exceed customer’s specifications and/or expectations.

• Identify and quantify customer requirements.

• Identify and quantify the process output and defects that fall short of these requirements and create a problem statement.

• State a clear and measurable project goal and a time limit for completion.

• Determine the vital factors that drive quality and which need to be measured, analysed, improved and controlled.

• Create a Project Charter, which will contain the problem definition, goal, business case, project scope, team members, and high level project plan for the M, A, I and C phases


The Measure step requires the specification of a data measurement plan and approach, collecting that data and ensuring that it is statistically valid. Statistical Process Control ( SPC ) tools are used to collect data. The Measure step must:

• Select and measure the characteristics in your process that are important to customer quality.

• Define what process outputs should be, by looking at the customer requirements and the project goal.

• Define the defect/s for the process i.e. outputs that fall outside the customer specification or expectation limits and which are measurable.

• Find the inputs to the process that contribute to defects.

• Define the exact dollar impact of eliminating the defects in terms of increased profitability and/or cost savings.

• Incorporate Measurement Systems Analysis ( MSA ).


Once the process data has been captured, hypotheses on the causal factors will be tested by analysis of the data using SPC and other appropriate tools and proven or disproven accordingly.


Following the process analysis phase, improvements to the process can be made which are targeted to bring the process back into compliance with its stated objectives. The Improve step must:

• Confirm process inputs which affect process outputs and lead to defects.

• Identify the acceptable range of inputs so the required outputs stay within specification.

• Plan, adjust and improve the process as required.

• Implement the changes.

• Install and validate a measurement system for the improved process.

• Verify the new process is working.


The Control phase focuses on continuous measurement to confirm that the process continues to meet its output objectives. Initially this will be carried out by the process improvement champion or Six Sigma leader and will be passed on to the relevant process owner or operator after a suitable period of stability.

DOE - DESIGN OF EXPERIMENTS - is defined as a systematic procedure carried out under controlled conditions to observe the effect, either know or unknown, or to test a hypothesis.

Design of Experiments are used to reduce design costs by speeding up the design process, reducing modifications and reducing product material and labour complexity. They may also be used to achieve manufacturing cost savings by minimising process variation and reducing rework, scrap, and the need for inspection.

Design of Experiments involves structuring a series of statistically sound tests, in which planned changes or variations (inputs) can be applied and the outputs measured for both individual changes to input (single effect) and combinations of inputs (interactions), so experimenting with all variations.


EPEI - EVERY PART EVERY INTERVAL - The objective within a lean environment is to reduce inventory and hence cash tied up in stock at each opportunity. EPEI is a measure of batch size expressed in time.

So for example:

A manufacturing cell produces 4 products (A,B,C & D)

The cell has 2 staff working within it and they work 20 days a month or 148 hours each. A total of 296 hours.

Efficiency, downtime, breaks etc. reduces total working hours in the cell by 15% to 251.6 hours per month.


At this point we have 251.6/20 or 12.58 hours per day available in the work cell. (available run time)

The cell needs to be manufacturing product for 170/20 or 8.5 hours per day. (run time)

This leaves us with a balance of 12.58-8.5 or 4.08 hours per day to carry out changeovers. (change time)

In our example we have a requirement for 4.75 hours to carry out 4 changeovers (1 of each product type). So we can only turn over the product range (our interval) 4.08/4.75 or 0.86 times per day. (product turnover rate)

EPEI = 1/Product Turnover Rate or 1.16

So in our example, rather than running large batches once a month and carrying a months worth of stock, or even accepting the calculation of EPEI as above and a stock of 1.16 days, our goal is to reduce this to at least a days stock. In order to do this we need to take action and hold a Kaizen event to reduce the changeover times to a total of 4.08 hour or less.


Product Turnover Rate now becomes 4.08/4.08 or 1 and EPEI becomes 1 also. So from an initial monthly stock of 200 units we reduced it to an EPEI of 1.16 and stock of 11.6 units and finally down to an EPEI of 1 and stock of 10 units.

In practice product mix may well change frequently and the EPEI will need to be recalculated to support optimising production.

ERP - ENTERPRISE RESOURCE PLANNING - proprietary software packages developed upon the principles of MRPII (see defintion below) and available from a wide range of providers. Esentially ERP systems have extended the boundaries of former MRPII based systems using modern technologies to provide real time business management information both inside and external to the business.

While functionality can vary with many vendor packages and the modules within them now being targeted or tailored to specific industries, they all in principle integrate internal and external management information across the company, its suppliers and its customers in a prescriptive form and business must generally change its structure, processes and procedures to suit the software package and its structure.

A growing number of ERP systems offer functionality which supports lean practices such as kanban, line balancing and design and are moving toward the pull principle but in essence they are push systems and careful implementation and selection is required to ensure effective use within a JIT (see defintion below) lean environment.


FISHBONE DIAGRAM - Developed by Dr Ishikawa the Fishbone Diagram, sometimes referred to as an Ishikawa Diagram or Cause & Effect Diagram, is a recognised simple, visual and effective method of identifying factors which affect a particular process, product or characteristic. The diagram, which is one of the 7 Basic Tools of Quality, can be used to identify issues causing the deviation or effect and indeed it is very often used and termed as a Negative Fishbone Diagram to identify causal factors which can interfere with a positive outcome or result.

Headings used on the main bones of the diagram can be changed as befits your situation and as shown in our example but common headings are People, Machines, Materials, Methods & Environment. In developing a Fishbone Diagram apply the Plan, Do, Check, Act ( PDCA ) cycle (see details later in this web page):


Clearly identify the effect, problem or characteristic to be analysed and agree the major causal factors for the major fishbones.


Get all staff involved in and around the effect, problem or characteristic being analysed and brainstorm or provide access to the diagram, say on the office wall and simply identify and note the issues on each of the major causal bones. Note all comments and issues and encourage all staff to participate.


Once the diagram has been formed, firstly ensure the noted issues are not in fact symptoms of the problem itself. The identified issues can then be examined one by one gathering data and measurements to validate the issue.


Set priorities and investigate further as required, conducting root cause analysis and identifying solutions.

FLOW CHARTS - are perhaps one of the most commonly used tools in business and provide a visual means of documenting and analysing processes, sometimes also referred to as Business Process Mapping (see defintion below). Again we recommend using the PDCA Cycle (see definition below) when considering changes to process and flowcharting is a good method to firstly document the current process, before making changes, to ensure all inputs and outputs are understood and to then flowchart the proposed new process.

Where the process being charted is complex and has many inputs and outputs, flowcharting can be carried out first at a macro, or high level and then broken down into subset flowcharts.

Standard symbols are recommended for use in flow charts as below:

The following examples show two different methods of flowcharting, the first being perhaps the most frequently used conventional method and the second method referred to as a Deployment Flowchart, where activities are shown in columns allocated by function. These columns are also referred to as Swim Lanes. In these examples we have identified the Non Value Add activities in red to assist analysis as a part of Kaizen activity.

FMEA - FAILURE MODES EFFECT ANALYSIS - is a process for analysing potential failure modes, their severity and the likelihood of occurrence within product design and manufacture, thus allowing such potential failures to be addressed. FMEA seeks to identify potential failure modes based on past experience with similar products or processes and is now widely used in both product design and manufacturing processes as well as within service industries. Accordingly, Design FMEA’s are often referred to as DFMEA and Process FMEA’s PFMEA

The process or steps for conducting an FMEA are:

Define the System

FMEA’s are often and arguably best conducted by the design or process engineer who has best knowledge of the product or system and its parameters (fit, form and function), although many large industries such as the automotive and aerospace industries, where they are used widely to reduce exposure to liability claims, have dedicated staff to conduct FMEA’s. In this step the basic functionality and process is identified, as well as any potential misuses or unintended uses.

Define Ground Rules and Assumptions

Identify and document prior knowledge and experience and all assumptions made in the design or process.

Construct System Block Diagrams

Essentially a simple flow chart showing the tiered, logical relationships of the product, system or process and its major components or process steps. There can be many levels of Block Diagrams and as shown here in our example we have broken it down to 3 levels and an FMEA should be performed at each level. We have also identified basic functionality relationships in a further example flow chart or Block Diagram for the Carriage (Level 2) and its constituent parts (Level 3). This part of the FMEA process is designed to ensure a thorough understanding of the product/system/process functionality and dependencies.

Construct an FMEA Worksheet

Using the information gathered including the Block Diagram flows, prepare your FMEA worksheet, modifying or adding additional parameters/headers from our simple example here, of a part of the system, as appropriate. Complete data fields and ratings as follows below:

Identify Failure Modes (the way in which the failure occurs)

While the definition of Failure Mode may vary across industries we will restrict ourselves here, in our example, to conventional thinking i.e. when the product/process/system fails to meet design intent or specification e.g. die cracking, hose bursting, relay failing to switch, short circuit etc..

Analyse the effects of the failure/s and rate the severity of each failure mode using the scale of:

FMEA Severity Ratings

Analyse the cause of failure taking into account historical data and experiences for similar products/systems/processes wherever available, an issue highly important in the case of liability limitation and rate the likely frequency or occurrence at which such failures could occur using the scale of:

FMEA Occurrence Ratings

Analyse the potential means of detection or identification of such failures and identify controls that can be implemented to capture these, again looking at historical information and experience. Rank the ability of such controls and checks to capture such failures, the Detection rating measuring the risk that the failure will elude such checks and balances ( the higher the rating number, the more likely it will elude them).

FMEA Detection Ratings

The Risk Priority Number ( RPN ) for the failure mode/s can now be calculated by simply multiplying the three ratings (Severity, Occurrence & Detection). Those areas with higher RPN numbers should of course be the areas given priority in terms of action and resolution with the aim being to either eliminate the risk, or minimise the risk or at least isolating the risk, confirming such actions by revisiting or repeating your FMEA analysis.

FMS - FLEXIBLE MANUFACTURING SYSTEMS - are cells or systems that can be changed or adapted rapidly to manufacture different products or components in different quantities as demand requires. Usually driven from two different aspects Flexible Manufacturing Systems can provide planning, capacity and production flexibility in terms of the flexibility of the machine itself, which is generally managed through a CNC type machine arrangement or robots, where different programmes and tooling can be quickly loaded/interchanged to manufacture various different products as required and also through the grouping of like or similar machines which further extend the flexibility of the FMS and its ability to absorb or manage varying demands.

FORCEFIELD ANALYSIS - a technique used for identifying and analysing the various forces that act positively and negatively on a situation. It is a visually effective way of recording the forces and of stimulating creative thinking and we recommend its use in a brainstorming type environment to provide some structure. Where it aids the identification of changes which provide a positive outcome on a situation, while planning actions to overcome any barriers to situations. The ratings or scoring should be kept simple while clearly agreed with the group and documented along with the analysis as our example here.


GEMBA - is a Japanese term which literally means "the real place" and is one of the ‘Three Reals’ or '3G's' (go to the workplace, see the real problem and get the facts) in kaizen, the others being ‘Gembutsu’ and ‘Genjitsu.’

In a lean manufacturing and kaizen context, Gemba generally refers to the factory floor or site of the problem, where the best improvement ideas and understanding will come from. Going to the ‘Gemba’ and looking for waste and opportunities for kaizen projects can be likened to the practice of Management By Walk About.

GEMBUTSU - is a Japanese term which literally means the “real thing” and is one of the ‘Three Reals’ or 3G’s (go to the workplace, see the real problem and get the facts) in kaizen, the others being ‘Gemba’ and ‘Genjitsu.’

In a lean manufacturing and kaizen context, Gembutsu requires that one should get as physically close to the actual problem or ‘real things’ as possible, in order to understand the problem. Physical attributes such as tooling, machinery, products, etc. are all Gembutsu.

GENJITSU - is a Japanese term which literally means the “real or original facts and data” and is one of the ‘Three Reals’ or 3G’s (go to the workplace, see the real problem and get the facts) in kaizen, the others being ‘Gemba’ and ‘Gembutsu.’

In a lean manufacturing and kaizen context, Genjitsu refers to the collection of data and specifications to support analysis and problem resolution based on actual facts.


HEIJUNKA - is a Japanese term for Production Leveling, Load Leveling or smoothing and in essence seeks to reduce or eliminate waste ( muda ) in the production flow by producing product at a constant rate which matches demand pull. This of course creates challenges in the real world as demand fluctuates and is where planning and quick changeover techniques such as EPEI and SMED are important to enable production to flow consistently and evenly. Toyota also introduced the Heijunka Box tool which supports the lean principle of visual tools. Essentially the Heijunka Box is a pigeon hole box loaded with Kanban cards according to the leveled demand schedule or it may be a simple time structured wall board.

In this example for instance the required EPEI or demand pull of a mixed model production arrangement requires that production for the week is 2 x A + 1 x B Monday, 2 x A + 1 x B + 1 x C Tuesday and so on….

Heijunka Box

HIDDEN FACTORY - is a term that refers to activities in a business, be it in the factory, in a service provided, or in the office, where the 7 wastes are embedded and hidden. There may well be documentation such as SOP’s for the process but workers may have work arounds, there may be rework etc all hidden and not at first evident and of course all carrying a cost to the business.

HISTOGRAM - one of the 7 Basic Tools of Quality and one which provides a pictorial representation of a set of data, showing the shape and spread. Histograms represent the frequency with which subsets of given values occur and care needs to be taken when collecting data to ensure the full and true variability is apparent. When preparing a histogram, it is important to ensure that a statistically valid number of subsets or classes of data are graphed relative to the data sample collected, to ensure the variation is visible and as a guide, the following should be considered:

Histogram Statistical Subsets & Data Points

Alternatively the number of subsets or classes can be calculated:

Calculate the Range, R = largest data value – smallest data value

Calculate the subset or class width, H = R/No. of classes

In a typical statistically sound process, we would expect our histogram to show us a commonly recognised Bell Curve shape or normal distribution, which has a range of 6 standard deviations (3 Sigma) or very close to it, as our example following, where we have gathered 174 pieces of data presented within 9 subsets or classes of data.

As good practice, we recommend applying the PDCA cycle to histogram data capture, preparation, analysis and action.

Where your histogram shape is not as expected, consider the following common shapes, which generally arise due to special reasons as shown below, in which case your data and/or process needs to be reviewed.

Having now constructed our histogram, we are ready to analyse the data, looking at the Process Capability ( Cp ), Process Capability ( Cpk) and Standard Deviation ( Sigma ).

Process Capability ( Cpk ) is the degree to which statistically sound processes are actually capable of meeting requirements or delivering to specification. The bare minimum is to achieve a capability index greater than 1, such that theoretically your process delivers within specification 100% of the time. That said however,in practice to assure capability and customer satisfaction, while allowing for any process variation or shift, generally speaking a Cpk of 1.33 or better is required, which provided the process mean is at target, will provide for non conforming parts per million ( PPM ) of no more than 64 PPM . Six Sigma methodolgy (see our definition below) is centred on achieving higher levels of quality with a Cpk requirement of 2.0 which provides for non conformance of no more than 3.4 PPM.

In our example calculation/analysis above we see Process Capability ( Cp ), which predicts the potential process performance is 0.86 and greater than our Process Capability Cpk of 0.71. To illustrate the relationship between these two indices, the following table is useful.

Cp & Cpk Process Capability Relationship

HOUSE OF QUALITY - refer to QFD, Quality Function Deployment below.


IDOV - IDENTIFY, DESIGN, OPTIMISE & VERIFY - is a Six Sigma related methodology, sometimes referred to as Design for Six Sigma ( DFSS - see definition above) that is generally applicable to the design of new products and services. The four phases of IDOV are:


In many ways comparable to the Define and Measure phases of DMADV (see above) the Identify phase seeks to establish the Voice of the Customer ( VOC ), perform competitive analysis, develop Critical to Quality CTQ’s and perform a Quality Function Deployment ( QFD ) and prepare the business model with delivery milestones and full target costing and benchmarking.


Similar to the Analyse & Design phases of DMADV with the exception of the Optimise element (see above), fundamentally the Design phase involves the formulation of design concepts and specification of design parameters using as much modelling and simulation as is possible, ensuring that the CTQ’s identified in the Identify phase are met. Risks and alternate design/process and business options are considered along with their inter dependencies, identified as a part of the QFD and a preferred route is identified using tools such as Failure Modes Effects Analysis ( FMEA ) and Design of Experiments ( DOE ).


Information such as process capability and design tolerancing based on statistical data are considered as a part of developing detailed design with a predicted performance which meets all required specifications from the CTQ’s and QFD ready for launch.


Consists of prototype testing and validating the design as the pre cursor to full production, sharing with all business areas and noting future improvement opportunities and plans as appropriate. Similar to the Verification phase of DMADV.

IED - INSIDE EXCHANGE OF DIE - the ultimate goal of batch production is to move towards a batch of a single unit, or at least to a minimal amount, thus reducing waste or muda. In order to achieve this and to support balancing of production, the number of tooling or die changes will by necessity increase. It is therefore necessary to improve the process of tooling or die changes and reduce the time taken in terms of lost production time. The time taken to exchange dies or tooling is broken down into IED ( Inside Exchange of Die ) and OED ( Outside Exchange of Die - see definition below ), with IED being work which can only be undertaken with the machine stopped. The goal is to reduce the amount of time taken for IED to a minimum and as such actions such as the following examples are to be encouraged:

Colour code accessory tooling to match die/tooling.

Standardise all fittings, so for example one spanner does all work.

Use quick release clamps.

Ensure dies pre heated where required.

Common size or location peg fitting bolsters


INVENTORY TURNS - a popular metric for businesses and accountants, inventory or stock turns is simply a measure of how many times stock is turned, used or sold for a period of time (generally per annum). There is some debate around how best to measure inventory or stock turns and while there are other versions, the common formulae are:

Sales $ / Average Inventory Level $ (at cost price)

Cost of Goods Sold $ / Average Inventory Level $ (at cost price)

We prefer to use the Sales $/ Average Inventory $ but which you use, can be often determined by the systems you are using and their logic. Whichever is used is really not too critical, although purists may debate this but as long as you remain consistent and use the metric for measuring improvement, it should not matter.

ISHAKAWA DIAGRAM - see Fishbone Diagram above.


JIDOKA - the Toyota Production System ( TPS ) is generally symbolised as a house, sometimes referred to as 'The House of Lean', with two pillars supporting the roof. One of these pillars represents Just In Time ( JIT ) and the other Jidoka. The principle idea is to show that TPS requires both pillars to be in place i.e. JIT and Jiodoka and that without one or other, the house will fall, that is to say that a sucessfull Lean implementation requires both principles are in place.

house of lean

Jidoka refers to automation with a human touch, sometimes referred to as ‘autonomation’ and in principle refers to a machine or process that will detect a problem and stop production, instead of continuing to produce out of specification product. There are many elements within Lean Manufacturing and TPS that effect or support Jidoka, such as Kanban, Andon and Poka-Yoke.

Principally Jidoka seeks to firstly detect the problem, then to stop further production until the problem can be fixed or at least temporarily sorted, ensuring the root cause is investigated and ultimately resolved. Care must be taken when temporary fixes or work arounds are used to ensure they do not compromise quality and the principles of lean and that they are only temporary fixes which do not become embedded in production.

JIT -JUST IN TIME - along with Jidoka above, Just In Time is the second of the two key ingredients of Lean. JIT is a strategy that provides reduction in buffer stock levels and hence frees up cashflow, with product produced Just In Time to meet customer demand on a pull basis.

Many people perceive MRP/ERP systems to be JIT systems but they are in fact fundamentally push systems, which based on a future demand forecast and master schedule drive and push materials into production to meet those future needs. Inevitably this leads to stock excesses at some point, be it raw materials, WIP or Finished Goods.

To operate a successful JIT operation, wide ranging Lean business systems need to be in place to manage work flow on a pull basis, from suppliers to customers and many of the tools listed here on this page such as Kanbans play a key role, as does product design, factory layout, quality control practices and critically staff involvement and ownership. As stock levels are reduced and all buffers removed, any stoppages in the work flow naturally lead to the inability to supply the customer and hence a critical need for robust systems and processes to address such stoppages with the implementation of root cause fixes.


KAIZEN - is a Japanese term which means continuous improvement and forms a part of the approach to Lean Management and Manufacturing. Business Engineering's Lean Performance Indicators provide a structured systematic approach, which supports the formation and management of Kaizen Groups.

Kaizen requires the constant introduction of small incremental changes, in all areas of a business, in order to improve quality and/or efficiency and assumes that the staff within the business are the best people to identify improvements, since they see and work within the processes all the time.

Kaizen can operate at an individual level, or through Kaizen Groups or Quality Circles brought together to identify potential improvements. To be effective, Kaizen must involve all levels of staff, as well as external suppliers and customers and is often operated on a cell basis.

The key features of Kaizen are:

• Improvements are based on many small changes rather than large or radical changes.

• As the ideas come from the workers themselves, they are less likely to be large or radical and therefore easier to implement.

• Small improvements are less likely to require major capital investment.

• The ideas come from the talents of the existing workforce at a low cost.

• All employees should continually be seeking ways to improve their own performance.

• It helps encourage workers to take ownership for their work and helps reinforce team working.

Kaizen events or reviews follow the PDCA cycle and can also use tools such as the 5 Whys to:

• Standardise operations

• Measure the standardised operation (find cycle time and amount of in-process inventory)

• Gauge measurements against requirements

• Innovate to meet requirements and increase productivity

• Standardise the new and improved operations

• Continue the review cycle and continuously improve in small increments

KANBAN - refer to the respective LPI within Business Engineering's Lean Performance Indicators page of our web site.


LEAN ACCOUNTING - applies the same doctrine to accounting as applied to overall Lean Management, Lean Manufacturing & Lean Service i.e. eliminating wasteful or non value add activities and practices, while focusing on measurement that is lean focused and supports and motivates lean decision making.

Traditional accounting can and often does run into conflict with Lean and fails to see and measure the benefits, instead focusing on traditional KPI’s and measures. Traditional management accounting methods, such as standard costing, activity-based costing, variance reporting, cost-plus pricing and ‘non plain English’ confusing financial reports, often conflict with lean and on the face of it, show negative impact. Other common traditional accounting KPI’s and metrics such as stock levels, Economic Order Quantities (EOQ’s), Purchase Price Variance, Make/Buy Analysis and Overhead Absorption, to name but a few, all in fact conflict with Lean practices.

These are replaced by:

• Lean focused performance measurements, providing a full financial understanding of Lean and its value add for customers.

• Value Stream Costing

• Decision making and reporting using a Box Score or Scorecard, where period comparisons and trends are monitored and more importantly performance targets or budgets are set and worked towards with Kaizen continuous improvement initiatives.

• Financial reports that are presented in ‘plain English’ and visual so that everyone can understand them.

• Eliminating traditional budgeting through monthly Sales, Operations, and Financial Planning processes ( SOFP )

• Systemic focus on wasteful processes leading to simplification and elimination of wasteful traditional accounting practices and systems.

In Lean Accounting, Standard Costing is replaced by Value Stream Costing which, since it is comprised of information readily at hand in the business, can be updated and analysed on a regular basis to support lean management and decision making. Value Stream Costing includes all direct and indirect costs for the Value Stream. The only costs not included in the Value Stream costing are for those activities which add no value or cross all value streams, such as Accounting, Design, IT etc and these costs are budgeted and monitored separately as discreet items and appear on the overall company Profit & Loss Account or Statement of Financial Performance as in our example following.

In our example of Value Stream Costing above, the materials costs are those received into each of the production lines during the week, staff costs are wages and all associated costs with employing staff in that week, machinery depreciation or cost of ownership in that week, facilities costs are the property lease or depreciation costs based on square metres used within the production line and any other direct or indirect costs directly attributable to that line. The Value Stream Costing, along with the Value Stream P&L or Statement of Financial Performance below is provided to management and staff in the Value Stream to encourage them to take ownership and as such all costs shown are directly controllable or can be influenced by those staff. As the data is provided in a timely real time manner to staff immediate action through Kaizen Groups etc can be taken to correct any anomalies or adverse trends and continuous improvement maintained.

In our example of the Company P&L or Statement of Financial Performance above, each of the Value Streams are included along with overhead costs for those areas in the company which do not add value, or which cross value stream boundaries and are not controllable by the staff, along with inventory movement to provide a total financial picture.

The Sales, Operations & Financial Planning Processes are driven through regular, generally monthly, meetings with all relevant staff present (those who contribute to the process and who can influence the processes), empowering staff and making practical decisions based on facts and data. The SOFP meeting agenda is in simple terms to set the plan for the coming period/month and by exception look at the previous period/months performance, following the PDCA cycle. Sales Forecasting, for each Value Stream, based on the best and latest information from customers and the market is the basis for SOFP planning or budgetting and in itself generally requires a Kaizen or continuous improvement project to improve information for basing forecasts on and improving accuracy. Inevitably the longer term the forecast, the more inaccurate it becomes and similarly the more detailed by product mix the more inaccurate. Generally try to keep the term out to no more than 12 to 18 months and keep product mix forecasts to a sensible level and not to individual products, allowing detailed planning procedures to take care of mix variances.

In our example above, the SOFP meeting would discuss the actuals and shorter term plans in detail, looking at how they can improve accuracy of forecasts and root causes of why they are inaccurate. They would also observe that Operations did not achieve plan in the first 2 months and again look for root causes and fixes. The meeting would also observe the red highlighted areas, where in April Cycle Time exceeded Takt Time and where maximum capacity available in production could not meet forecast sales. In July the green highlighted areas indicate the opposite problem i.e. capacity exceeds demand and discussions would be held how best to deal with this.

The overall goal using the data that is discussed by all parties in the SOFP meeting is to balance and agree production rates and changes to plans in order to provide the best overall picture for the company taking into account all constraints and inventory costs and importantly identifying areas where investment in machinery, training, staff and Kaizen Projects may be required to balance and optimise plans in the future. The other important goal of SOFP meetings is the communication, so that all parties have a clear understanding of company plans and any issues and there role within these.

Once the planning of the sheet is agreed final edits and calculations etc may be done after the meeting and finally the Financial section is completed as in our example and the Sheet is communicated finally to all areas.

LEAN DYNAMICS - is a concept introduced by Stephen Ruffa through his research into the USA aerospace industry and how lean concepts could drive major cost savings within the industry. However, rather than focusing on elimination of waste, Lean Dynamics seeks to address the root causes or dynamic business conditions that initiate waste in the first instance.

Ruffa’s study provided strong evidence that emphasis should be placed on applying lean principles to reducing and/or eliminating business variations caused by things such as demand spikes and falls, energy price fluctuations, natural disasters, changing global economics, etc. that caused workarounds to be implemented and that this was critical to overcoming the disruption that often causes waste to accumulate in the first place.

Lean Dynamics or Variation Management which uses the value curve as its measurement criteria, focuses on identifying and resolving reasons for delays or disconnects in operations, decision-making, information, and innovation that lead to workarounds and amplify disruption when business conditions change.

LEAN MANUFACTURING - is a methodology which focuses on eliminating waste, ensuring that all processes and resources are adding value within a business and its customer base.

The key elements to be addressed within a ‘Lean’ environment are:

• Elimination of Waste Ensuring that all resources applied and processes used, add value to the business and hence an emphasis on analysing the Value Stream (see definition below). Toyota, who are generally accepted as the founders of modern lean principles, recognise three types of waste (Muda, Muri and Mura – see definitions below) although in practice a lot of Lean implementations focus on Muda only, which itself is broken down into what are known, as the 7 Wastes (see definition above):

1. Overproduction (manufacturing) or Wasted Effort (Services)

2. Waiting

3. Transport

4. Extra Processing

5. Inventory (Raw Materials, WIP and Finished Goods)

6. Motion

7. Defects

• Doing more with less, doing it right first time and being smarter.

• A JIT (see definition above) pull system, which ensures your business is flowing and balanced throughout, at the rate of sales or customer demand.

• A philosophy of Kaizen (see definition above) continuous improvement throughout the business.

• A set of visual tools that support business in its approach to Kaizen or continuous improvement. Many of these tools are covered here on this webpage and include, 5S, 5 Whys, Kanban, Poka Yoke, SMED, Value Stream Mapping and a range of visual data capture and analysis tools.

• Provision of a flexible business, able to react to customer demand and provision of product and services in a timely manner.

As with any programme of change, those businesses seeking to implement Lean need to carefully structure the approach and give consideration to three areas, these being Purpose, Process and People, perhaps the most difficult of these being the latter. Inherent within Lean and Kaizen is the philosophy that change has to come from the staff in the organisation and while senior management must support and coach, a truly successful implementation occurs when staff are pulling the implementation themselves with an urgency and hunger for change, understanding the potential benefits.

LEAN MANAGEMENT - this term is often generically applied to Lean Manufacturing and its implementation but we will define it as a structure to support and engage Lean within a company.

As with any change programme, leadership from the senior executive and middle management is critical and must be visibly supportive of all staff. As every companies hierarchy and structure will vary to some degree, there is no prescriptive set of rules as to who does what within a lean structure but consider this set of responsibilities as a guide. In summary, we suggest that the overall goal of management in a lean environment is to create a hunger and urgency for change from the staff to pull change through the company. In order to achieve this, management has to be completely open to change and supportive of each step of the process driving change, while eliminating any barriers to constant change or continuous improvement.

LEAN SIGMA - sometimes referred to as Lean Six Sigma, is a combination of Lean (see definition above) and Six Sigma (see definition below). Traditionally the two methodologies or approaches were used by businesses exclusively but there is a growing trend towards using both in tandem with one another. In essence, Lean seeks to eliminate waste or non value add processes while Six Sigma seeks to improve the quality of the value add processes, promote innovation and to reduce variability within them. With this focus and ensuring management clarity on where each of the two are applied business can enjoy the benefits of both methodologies.

LEAN SOURCING - is focused on delivering:

• Optimal buy in from all stakeholders including key functional areas, operations and purchasing, ensuring balanced consideration of quality, price and supply performance.

• Greater likelihood of implementing identified sourcing savings

• Improved quality and reduced waste

• On going focus on cost reduction opportunities through collaboration with supply partners

Where large numbers of parts are involved, it may be more efficient and cost prudent to categorise your parts and source by category. Basic Pareto Analysis will highlight the areas to be prioritised providing the best return opportunity. Factors to be considered in Lean Sourcing decisions include:

• Identifying potential suppliers internationally and nationally

• Qualifying those suppliers

• Rating those suppliers on quality, terms and lead times

• Rationalising suppliers

• Supplier collaboration and development

• Supply risk

• Tooling costs

• Minimising cost of panic or rush shipments

• Inventory carrying cost analysis

• Trade off analysis on cycle times

• Minimising customs delays

• Distribution and transportation network optimisation

• Transport cost analysis

• Managing service levels

• Developing favourable contract terms and conditions

• Minimising duties

• Minimising customs and brokerage fees

• Managing cross border, security, import compliance issues and controls

• Managing tax incentives

• Managing intellectual property issues

• Managing currency exchange rate risks and hedging policies

LOAD LEVELLING - refer to Heijunka above.


MRP - MATERIAL REQUIREMENTS PLANNING - is a production planning and materials or inventory control system, largely software based and developed to help manufacturers ensure that materials are available for production and that products are available for delivery to customers on time, while maintaining the lowest level of inventory possible. Largely replaced within industry now by MRPII and ERP software systems, which extend the scope of MRP, it was in its day considered revolutionary.

MRP II- MANUFACTURING RESOURCE PLANNING II - is an integrated software based solution for the management of operational and financial planning in manufacturing businesses. Available from a range of vendors, MRPII is available in various proprietary software packages and generally most vendors supply their packages in modular form with optional bolt on modules as required by the individual business and dependent on how far it wishes to implement the system across its business functions.

Built on and encompassing the founding core of MRP, MRPII addresses all business management processes including:

• Materials Requirement Planning ( MRP )

• Master production schedule ( MPS )

• Item Master Data

• Bill of Materials ( BOM )

• Production Resources Information

• Inventory and Order Management

• Purchasing Management

• Shop Floor Control & Data Collection

• Capacity Planning

• Standard Costing/Average Costing/Last Cost

• ‘What If’ Analysis

• Lot Traceability

• Contract Management

• Tool Management

• Engineering Change Control

• Configuration Management

• Sales Analysis and Forecasting

• Finite Capacity Scheduling

• Accounts Payable

• Accounts Receivable

• Sales Order Management

• Distribution Requirements Planning

• Warehouse Management

While still largely used within industry, MRPII is generally accepted as having been replaced by modern ERP or ERP II based systems which take the principles further into real time based environments, using modern database and hardware platforms and extending the boundaries once again outside the single business entity and into the ‘e’ or electronic business arena.

MTO - MAKE TO ORDER - is a manufacturing process designed to satisfy customer demand only upon receiving a customer order. Essentially pulled by demand on a JIT basis, a pre requisite of lean systems, supply is activated or pulled all the way back through the supply chain to suppliers of raw materials and componentry.

MTS - MAKE TO STOCK - is where products are manufactured and placed or pushed into stock based on demand forecasts. Push production is the exact opposite of a pull or JIT system and is highly dependent on the ability to accurately forecast demand to avoid either build up of stock or stock outs. Management of stock levels throughout the supply chain and manufacturing cycle, along with efficient and balanced use of resources are key to a successful MTS operation and tools such as MRPII and ERP systems are commonly used.

MUDA - is a Japanese term for wasteful or non value add activity. It is one of three types of waste, the others being Mura and Muri (see definitions below), identified as a part of the Toyota Production System ( TPS ) and in preference to the other 2 wastes, a core element of Lean Manufacturing’s attention to waste elimination.

Toyota identified or broke Muda down further into seven waste types (see full details above), these being:




Extra Processing




MURA - is a Japanese term for uneveness or fluctuation. It is one of three types of waste, the others being Muda and Muri (see definitions above and below), identified as a part of the Toyota Production System ( TPS ). Mura relates to waste which is created when approaches such as Heijunka or production levelling and Kanban are not used and operators are either over or under utilised and stocks are not minimised.

MURI - is a Japanese term for unreasonable or overburden. It is one of three types of waste, the others being Muda and Mura (see definitions above), identified as a part of the Toyota Production System ( TPS ). Muri relates to waste which is created when standardised work patterns are not used with each process and function reduced to its simplest elements for analysis and standardisation to achieve the standard condition. In this manner with standardised work and realistic Takt time, Toyota observe improved staff morale, higher quality, improved productivity and resulting reduced costs.


NVA - NON VALUE ADD - is a term which refers to those activities, processes and resources that do not add value to a product or service or which the customer would be unwilling to pay for knowing it is possible to eliminate the waste without deterioration of the fit, form or function of the product or service. Elimination of Non Value Add or Non Value Adding activities, processes and resources is a core principle of Lean Manufacturing, which identifies 3 types of waste ( Muda, Mura & Muri - see definitions above) with Muda being perhaps the best known and further broken down into the 7 Wastes (see above).

Refer also to 'Value Add' below.


OED - OUTSIDE EXCHANGE OF DIE - the ultimate goal of batch production is to move towards a batch of a single unit, or at least to a minimal amount, thus reducing waste or muda. In order to achieve this and to support balancing of production, the number of tooling or die changes will by necessity increase. It is therefore necessary to improve the process of tooling or die changes and reduce the time taken in terms of lost production time. The time taken to exchange dies or tooling is broken down into IED ( Inside Exchange of Die - see definition above) and OED ( Outside Exchange of Die ), with OED being work which can be undertaken while the machine remains running. The goal is to conduct as much work as possible while the machine is working and productive and activity such as assembly of jigs, checking, maintenance of tooling, cleaning, storage etc should all be conducted during its productive cycle ready for quick changeover when required.

ONE PIECE FLOW - or Single Piece Flow is, as the name suggests, the production of product at each stage or step of the process one at a time. This being the ultimate goal of lean with no inventory or buffers between steps, the achievement and sustainability of One Piece Flow requires that many of the tools of Lean are effectively employed and operated including to name a few, JIT, Preventative Maintenance, Multi skilling, Quick Change and Cell Based Manufacture.

One Piece Flow provides a number of benefits, these being:

• Reduced throughput time and increased speed from customer order to shipment.

• Improved value add ratio through elimination of non value add activities and hence reduced operating costs.

• Higher degree of flexibility to accommodate changes in customer demand.

• Factory space savings.

• Promotion of Kaizen or continuous improvement as problems are exposed.

• Lowering the risk of product damage, deterioration, and obsolescence.

• Simplifying scheduling.

• Supporting variable product mix production.


PARETO CHART - particularly useful in helping prioritise data sets and ranking problems, focusing improvement initiatives where potential gains are greatest. Pareto’s principle, sometimes referred to as the 80/20 Rule, is that in any set of data, a few important elements (empirically 20%) describe most (empirically 80%) of the situation e.g. 80% of variation arises from 20% of the problems, 80% of sales come from 20% of customers etc. Pareto Charts and Analysis are one of the Seven Basic Tools of Quality and wherever possible we recommend that the analysis should be measured in terms of cost to the business such that improvements are always focused on providing the best return to the business.

Before we gather data and prepare a Pareto Chart we recommend that care be taken to ensure the process or problem being measured and analysed is reasonably stable, otherwise results and action priorities from this can be skewed. Refer to Histograms section above.

In our example here we look at machine downtime and the causal factors but we have maintained the measure in minutes as changing to a dollar value will not affect the relative rankings in this case. As can be seen the two largest causes (20% of the total number of causes) account for 80% of the lost time and it is these two causes that our efforts need to be focused on to provide maximum effect on the business.

Once we have constructed a Pareto chart we can apply the 5 Why’s (see definition above) to our results and ensure we have understood the data and analysis and then when addressing improvements apply the PDCA Cycle (see definition above).

PDCA - PLAN DO CHECK ACT - a simple but highly effective principle developed by Walter Shewart and widely used as a part of Deming’s approach to quality control and continuous improvement. The cycle recognises that reducing variation involves constantly monitoring and learning about the process, modifying the process based on conclusions and results from each cycle of the PDCA, with continuous reiteration of all steps expanding knowledge each time.

PDCA Plan Do check Act Cycle

Deming did in fact change the acronym to PDSA , his emphasis being on ‘Study’ rather than just ’Check’ on each cycle, ensuring that we understand the process, what is happening, what is expected and what we should be doing differently.

While Six Sigma has taken the concept further and applies it through its DMAIC (see definition above) methodology, it does in essence have the same principles.

POKA-YOKE - is a Japanese term that means "fail-safing" or "mistake-proofing". A Poka-Yoke is any mechanism in a lean manufacturing process that helps an operator avoid mistakes. Its purpose is to eliminate product defects by preventing, correcting, or drawing attention to human errors as they occur.

Toyota recognised three types of Poka-Yoke:

1. The ‘contact’ method identifies product defects by testing the product's shape, size, colour, or other physical attributes.

2. The ‘fixed value’ method alerts the operator if a certain number of movements are not made.

3. The ‘motion step’ method determines whether the specified steps of the process have been followed.

PPM - PARTS PER MILLION - is a commonly used statistical measure frequently used in Six Sigma etc. Literally means 1 part per million occurences.

PROCESS MAPPING - is a core activity of any business improvement initiative including Lean, Six Sigma, TQM and ISO 9001 and we strongly recommend that before you attempt to improve or change any existing process, you ensure a sound understanding of the current process by documenting this with full input from all areas and functions involved.

Known by many names including Flow Charts (see our section on these above), Business Process Maps can be presented in a variety of formats but fundamentally they all provide a visual map of how a process operates across a business including the what, how, who and when.

There are now a wide variety of software tools which aid Process mapping and enable the different levels of the detail to be nested for ease of viewing and understanding and certainly many of these tools are invaluable. That said manual preparation and analysis is still equally valid and in fact often more productive with groups.

Many of the more sophisticated software tools for mapping also offer Process Modelling functionality which provide for cost analysis of process variation and what if analysis.

There are some basic rules, which if followed will help keep your process mapping accurate, clear and uncluttered:

• Define the start and finish or input and output points for your process.

• Ensure all parties who either provide input to or take output from your process are involved in the mapping and clearly identify ALL variations and once your map is complete, ensure that all parties validate it.

• Where sub processes feed into your main process, consider mapping these in a separate or nested map, to avoid distraction and your overall process map becoming too complex.

• Use a common format or approach to process mapping throughout your business and use standard symbols to enable ease of understanding by all staff.

• Challenge the understanding of the process at all stages with all parties and use the 5 Why's.

PULL SYSTEM - is where the customers demand, which may be external or simply the next step in the production or sales process, pulls the product through the production and delivery process, on a Just In Time ( JIT ) basis. Refer to JIT and Lean Manufacturing definitions above.

PUSH SYSTEM - is where based on a demand forecast or historical trend, production is planned at a rate to meet forecast, with imbalances inbetween production and customer demand met by holding stock at various points. Most MRP / MRP II and ERP systems (see defintions above) are push systems.


QFD - QUALITY FUNCTION DEPLOYMENT is, as described by its developer, Yoji Akao, “a method for developing a design quality aimed at satisfying the consumer and then translating the consumer’s demand into design targets and major quality assurance points, to be used throughout the production phase.” Quality Functional Deployment techniques can be equally effectively applied to physical products, as well as processes and services.

In implementing QFD, there are 3 main goals, these being:

• Prioritise spoken and unspoken customer wants and needs.

• Translate these needs into technical characteristics and specifications.

• Build and deliver a quality product or service by focusing everybody toward customer satisfaction.

QFD is a key tool used within the Design for Six Sigma ( DFSS ) and Six Sigma Define, Measure, Analyse, Improve & Control ( DMAIC ) processes to assist in bridging the link between customer requirements and technical requirements or understanding the Voice of the Customer ( VOC ).

QFD implementation, which is broken down into 4 stages, has many similarities to other methodologies such as Simultaneous Engineering and Management by Objectives, in that it applies a matrix management or cross functional management approach and seeks to establish to a range of clear objectives by which to manage the process. The 4 stages are:

• Product Planning

• Product Design

• Process Planning

• Process Control

Stage 1, Product Planning, revolves around a cross functional team led by Sales & Marketing, building a ‘House of Quality’ although as stressed by Akao, this is simply one of the tools used to highlight and analyse the data and not the QFD, which is the overall process. The objective of the House of Quality and Stage 1 of the QFD process is to clearly and accurately capture and document customer requirements, termed the Voice of the Customer ( VOC ), warranty data, competitive opportunities, product measurements, competing product measures, and the technical ability of the company to meet customer requirements.

In building a House of Quality and referring to our simple example below:

• The Customer Requirements are firstly listed and ranked.

• Customer Requirements are translated into Design or Technical Requirements necessary to achieve the Customer Requirements and the relationships between the two are ranked as Weak, Moderate or Strong.

• The roof of the house is next constructed and this area used to highlight the relationships between the design requirements and to what degree these affect each other positively or negatively, as highlighted by the use of symbols. This provides design some strong guidance and understanding of design influences and where to concentrate efforts to maximise design effectiveness.

• Next we look at how customers rank both ourselves and competitor products against each of the customer requirements and the comparison is plotted, providing us with a visual means of identifying our weaknesses.

• Similarly we then look at the design or technical requirements and compare ourselves to competitor products.

• A further identifier for design to focus on is the level of technical difficulty in delivering the required requirements, these being ranked from 1 to 5.

• Finally the overall score or importance is calculated for the House by calculating the total product sum for each ranked customer/technical relationship. In our example for instance, column 2 ‘Highly Portable’ is the sum of 5 x 3 + 3 x 9 = 42.

Stage 2, Product Design, revolves around a cross functional team, led by the Design or Technical Area, building a simplified House of Quality. Where in Phase 1 we translated the Voice of the Customer ( VOC ) into Design Requirements, in Phase 2 we translate the Design Requirements from Stage 1 into Product Concepts/Specifications.

Stage 3, Process Planning, revolves again around a cross functional team, this time led by Manufacturing and as in Stage 2 a simplified House of Quality is used to translate Product Concepts from Stage 2 into documented manufacturing processes ( SOP’s ).

Finally in Stage 4, Process Control, led by Quality translates the SOP’s from Stage 3 into Quality Measures to monitor production, train staff and set in place preventative maintenance schedules.


RED TAG - Used as a means to identify all items (parts, materials, tooling, consumables, paperwork, etc..) not required, or which are at least to be questioned as to why they are required in the workplace, when starting a 5S excercise. The Red Tag is applied to all items sorted in the first stage of the 5S process (Refer to Business Engineering's Lean Performance Indicators ). All tagged items are then removed from the work area to a holding area and there reviewed. Items not required are disposed of approriately and items which after review are required in the workplace are returned and managed in line with the other stages of 5S.

ROOT CAUSE ANALYSIS - is an approach to problem solving which requires going beyond the obvious or apparent problem and ‘drilling down’ to address the root or fundamental cause.

Some of the available tools used and covered separately here in our web page, are:

• 5 Whys


• Pareto Analysis

• Fishbone or Ishikawa Diagrams

RUN CHART - is a very commonly used and simple chart tracking a measurement of a characteristic over time and is usually used to monitor process outputs and highlight trends, cycles and any changes in the long range average output. Variation is to be expected and the extent of the variation and trends are more the issues to be looked at.


SET UP TIME - is as the name suggests, the time taken to prepare a machine, process or system such that it is ready to function as intended in producing product or a required output.

Being a non value add activity, set up activities are periods of time and activities which should be a focus of continuous improvement.

SCATTER DIAGRAM - see Correlation Diagram above.

SIMULTANEOUS ENGINEERING - also known as Concurrent Engineering, is an approach used to bring new product, or modifications to existing product, to market in a timely fashion. Essentially the approach requires that business areas or departments such as Design, Logistics and Production work in parallel and collaboratively with a focus on early product definition.

Simultaneous Engineering requires a multi functional team approach to product development, which is of course in line with Design for Six Sigma ( DFSS ) principles and often requires a break from traditional hierarchical management structures and a move to a matrix management structure.

SINGLE PIECE FLOW - see One Piece Flow above.

SIX SIGMA - is a business management strategy developed by Motorola, which seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimising variability in manufacturing and business processes.

Six Sigma projects have a clear focus on achieving measurable and quantifiable financial returns to the business and a commitment to making decisions on the basis of verifiable hard data.

As discussed above, in our Histogram section, a stable process will exhibit a spread of variation within a normal distribution curve as shown below, where 99.7% of all values will fall within 3 standard deviations of the mean and there will be no more than 2,700 parts or results per million outside that. A Six Sigma process seeks to improve on this statistical basis and deliver 99.99966% within specification and no more than 3.4 defective parts per million. This is in fact based on a variation spread around the mean of 4.5 Sigma but allows for a further buffer and longer term variation mean shift of up to 1.5 Sigma.

Six Sigma is delivered through a methodology of Define, Measure, Analyse, Improve & Control ( DMAIC – see full definition above). A further methodology of Define, Measure, Analyse, Design, Verify (DMADV – see definition above) also known as Design for Six Sigma ( DFSS ) is sometimes used.

Like both Lean and TQM, Six Sigma demands the full commitment of the organisation, this being driven from the CEO and senior management who must ensure the resources, skills and time are available. Six Sigma implementation is generally managed within companies by trained professionals who are recognised according to their skill level by a grade of belt ranging from Yellow Belt (basic training), Green Belt (fully trained but operate generally under a Black Belt), Black Belt (Highly proficient and employed 100% of their time as Six Sigma professionals) and finally Master Black Belts who provide coaching and training while focusing on managing standards of application of Six Sigma and identifying projects.

Six Sigma demands the use of factual statistical data to manage the continuous improvement of process and a range of management tools are used within the DMAIC or DMADV processes, which include many covered in their own right here in our web page and which are also used in both Lean and TQM as below:

• 5 Whys

• Fishbone Diagram

• Control Chart

• Design of Experiments

• Histogram

• Pareto Chart

• Quality Function Deployment ( QFD )

• Roof Cause Analysis

• Scatter Diagram

• Process Capability

• Failure Modes effects Analysis ( FMEA )

• Statistical Analysis

• Critical to Quality Tree ( CTQ )

• Analysis of Variance ( ANOVA )

SMED - SINGLE MINUTE EXCHANGE OF DIE is often used interchangeably with the term “quick changeover.” SMED however sets a target time and requires that the change over takes place in single digits i.e. less than 10 minutes.

With a ‘Lean’ focus on reducing stock, hence reducing batch sizes and increasing the number of set ups, which are non value add activities, business must focus on SMED to remain competitive.

Change overs or Set Ups can be broken down into two stages, Inside Exchange of Die ( IED ) activities which can only be performed with the machine or process stopped and Outside Exchange of Die ( OED ) activities which can be performed with the machine or process running. (refer to definitions of both of these are above).

SOP - STANDARD OPERATING PROCEDURE - documentation recording the process of performing any function within your business, from office functions to factory floor assembly functions. The format of Standard Operating Procedures ( SOP's ) can be whatever fits your particular situation but the principle is to clearly document the process in order that it is standardised across your operation and all staff have a reference point for training and information. Things we would recommend and that are included in our example SOP here are, lots of pictures ( as the old adage says, a picture is worth a thousand words ), OHS (Health & Safety) instructions, tooling to be used and parts/materials to be used.

Once issued and in place, it is good practice to have an audit regime in place to ensure your SOP's remain up to date and of course, to have procedures in place which track and approve all design and process changes before they are implemented so SOP's can be updated an in place before changes occur. Many ERP and other Business Systems now have facility for on line SOP's which helps with maintenance and linkages to drawings, BOM's etc.

SPC - STATISTICAL PROCESS CONTROL - is the application of statistical methods to either understanding a particular process, understanding the natural variation arising in a particular process or working to eliminate special cause variation, when process variation is high and the process is considered out of control.

The use of statistical methods is well founded in modern manufacturing and process improvement processes including Lean and Six Sigma and some of the commonly used tools include Control Charts, Process Capability and Design of Experiments ( DOE ), all covered in their own right in our web page here.

STANDARD or STANDARDISED WORK - is the method of delivering the most effective combination of manpower, materials and machinery. Comprising of three elements, Standard Work can only be applied to repetitive work where the three elements are constant:

1. Takt Time ( refer to our description below in this web page)

2. Work Sequence ( the most efficient process order, eliminating all waste)

3. Standard Work in Process ( SWIP - the minimum work in progress to maintain Standard work – see below in this section)

Standard work is a fundamental principle within the Toyota Production System ( TPS ) and is normally presented on a Standard Work Sheet as our example here:

In our simple example here, with a Takt Time (see definition below) of 45 minutes, our process delivers product in a Cycle Time of 42 minutes, which of course meets the current demand. There are however obvious areas for improvement with waste evident and a likely target would be to reduce Cycle Time to at least match the automatic machine time of 38 minutes, leaving the operator free to conduct other activities.

A Standard Work base line is a pre-requisite for Kaizen or continuous improvement and enables all staff involved to understand the current situation and visualise where improvements are possible.

In determining staffing level targets, a good guide can be taken from the formula:

Staff Required = Manual Time / Takt time

which in our example comes to 0.8, in which case of course the staff member will need to be shared with another process or cell.

Work Sheets will often elaborate upon the above example, to include such disciplines as work cell layout, process step instructions and pictures ( incorporating the Standard Operating Procedures – SOP ) etc.

Finally, Standard Work in Process ( SWIP ), is as a guide/rule, calculated as follows:

SWIP = (Manual Time + Automatic Time) / Takt Time

As with all our improvement processes and tools, it is important that Standard Work is set and agreed with the staff involved in the process and we ensure that it is a fair and sustainable s


TAKT TIME - is the German word for an orchestral conductors baton, used to regulate the beat or timing of the music and hence its application to manufacturing where Takt Time refers to the beat time or rhythm in which the customer demands or pulls product from manufacturing.

Based on the Takt time, Lean manufacturing companies design their processes for optimal balanced production efficiency to meet demand, adjusting the Takt time as necessary to match any fluctuation in demand and ensuring that ‘waste’ (refer to 7 Wastes above) is not allowed to accumulate in the process at any stage.

THROUGHPUT TIME - also known as Cycle Time - refer above.

TOC - THEORY OF CONSTRAINTS - is an analytical based management approach to simplifying the improvement of business processes. Introduced by Dr. Eliyahu Goldratt in his book ‘The Goal,’ TOC has proven sucessful for many companies but is not without its critics. It is not our intent to cover TOC in detail here but merely to ensure awareness of the basic principles and tools available and we are happy to advise and assist further as required.

The principles of Theory of Constraints are quite simply that any process or business is only as good as its weakest link and that any business can be measured and hence controlled by variation within any of three key measures, these being throughput, operational expense and inventory.

In reality any business will in fact have several constraints but care is to be taken in keeping the list to the few underlying or root cause constraints and not trying to solve a massive number of detail issues. The Theory of Constraints tools and approaches, see below, help in identifying these constraints, and also in focusing on simple, effective solutions to removing them.

• Critical Chain Project Management

• Drum-Buffer-Rope Scheduling

• Constraint-based Strategy

• Supply Chain Management

• Distribution Systems

• Throughput Accounting

• Jonah Thinking Processes

o Current Reality Tree ( CRT )

o Evaporating Cloud

o Core Conflict Cloud ( CCC )

o Future Reality Tree ( FRT )

o Negative Branch Realisations ( NBR )

o Positive Reinforcement Loop ( PRL )

o Prerequiste Tree ( PRT )

o Transition Tree ( TT )

o Strategy & Tactics

TPM - TOTAL PRODUCTIVE MAINTENANCE - an early narrow form of Lean Manufacturing and now a key element within Lean Manufacturing, TPM was developed by Japanese company Nippondenso, a Toyota subsidiary. They recognised that conventional Preventative Maintenance, where maintenance is scheduled based on a run time period and historical and predictive analysis techniques and is carried out by dedicated maintenance staff, was not the most efficient approach and could be further developed.

Total Productive Maintenance ( TPM ) recognises that to maximise effectiveness and optimise plant and equipment life, business needs to focus on three facets:

• Preventative Maintenance

• Maintenance Prevention

• Maintainability Improvement

With these three areas of focus, the goals of TPM are to produce no defective or out of specification product ( Zero Defects – see definition below ), have no unplanned downtime and no safety related incidents.

TPM recognises that the first people to ‘feel’ or ‘sense’ drift or deterioration in any plant and equipment will be the trained operators and as such they are best placed and can be most effective in undertaking, certainly, all routine maintenance, if not all maintenance. Known as Autonomous Maintenance, the operators are given full training and all procedures are fully documented.

Many of the tools and approaches used in TPM are similar, if not identical to Lean Manufacturing and include:

Gap Analysis of historic plant and equipment failures using Fishbone Diagrams, 5 Whys’ etc.

5S Cleaning & Organising

Kaizen or Continuous Improvement Groups

Use of Statistical Process Control ( SPC ) & related tools such as Run Charts, Control Charts etc.

Single Minute Exchange of Die ( SMED )

Focus on eliminating waste which in the case of TPM is identified as Set Up Time, Start Up Quality Losses, Breakdown Time, Idling Time Losses, Cycle Time (speed) Losses and In Process Quality Losses.

TPS - TOYOTA PRODUCTION SYSTEM - is a system or approach to company management that we have covered here on our web site in various aspects, including management approach, staff training and involvement and many of the tools and techniques.

To summarise and perhaps provide further clarity to the overall focus we will quote from Toyota themselves:

“Companies that are more efficient than their competitors in providing customers with high quality goods and services will thrive. Companies that are less efficient than their competitors will perish.”

“ The Toyota Production System is a framework of concepts and methods for enhancing corporate vitality. It enables companies to achieve continual gains in productivity while satisfying customers’ expectations for quality and prompt delivery.”

“To be sure, the Toyota Production system enforces a creative tension in the workplace. Employees don’t coast. Just in Time production demands continuous vigilance. Continuing improvements in the name of Kaizen demand unflagging efforts to find better ways of doing things. Managers, too, must do their part in structuring a workplace environment that nurtures employee initiative. The overall result, however, is a simulating workplace: a workplace where employees can take charge of their own destinies.”

“Customers want the best possible products at the lowest possible prices and they want them as soon as possible. The Toyota Production System provides for fulfilling customer demand efficiently and promptly by linking all production activity to sales in the marketplace.”

“Just in Time production can help companies achieve spectacular gains in productivity and in quality but Just in Time production is impossible unless companies distribute work evenly by levelling production.”

“The most important feature of the Toyota Production System is the way it links all production activity to real demand. Everything that happens in the system happens only in the name of fulfilling actual orders from dealers. The system works that way because it is a pull system, in contrast with conventional push systems.”

“We talk about the Toyota Production System in terms of arranging work in a single, smooth flow. That means arranging work inside each process to flow smoothly from one step to the next. It means laying out plants so that work proceeds directly from one process to the next without any detours into storage. It also means devising logistics so that work moves smoothly and on schedule from raw materials plants through machining plants to assembly plants and on to distributors, dealers and customers.”

“The origins of the Toyota Production system are traceable to an automatic loom developed early in the last century by Sakichi Toyoda. That loom was important because it stopped automatically whenever a thread snapped. The principle of stopping work immediately whenever a problem occurs is fundamental to the Toyota Production System and we call that principle Jidoka.”

“Standardised or Standard Work is a tool for maintaining productivity, quality and safety at high levels. It provides a consistent framework for performing work at the designated Takt time and for illuminating opportunities for making improvements in work procedures.”

“Kaizen furnishes the dynamism of continuing improvements and the very human motivation of encouraging individuals to take part in designing and managing their own jobs. Kaizen improvements in standardised work help maximise productivity at every worksite.”

“Customer satisfaction is a reflection of employee satisfaction. In that sense, the Toyota Production System has been successful in earning customer satisfaction because it provides employees with fulfilling work.”

“The Toyota Production System is becoming more than a production system. People are learning to use Just in Time principles to raise efficiency and quality in an ever broadening range of business and services. They are learning to apply those principles in chains of processes, including product development, manufacturing, transport, sales and service.”

TQC - TOTAL QUALITY CONTROL - “is an effective system for integrating the quality development, quality maintenance, and quality improvement efforts of the various groups in an organisation so as to enable production and service at the most economical levels which allow full customer satisfaction.”

TQC was introduced in 1951 by Armand Feigenbaum, an American Quality Control Guru and was later coined by Deming and more universally accepted as Total Quality Management ( TQM – see below ).

TQM - TOTAL QUALITY MANAGEMENT - is a philosophy which fundamentally promotes that Quality and Productivity are the responsibility of everyone within a business and that both management and workers alike must share in this responsibility.

Dr. W Edwards Deming is recognised as the person who fathered TQM through his well known 14 Management Points or Principles (see full defintion above on this web page), which are the foundations of TQM and which must all be accepted and cannot be 'cherry picked,' as they all inter relate to one another in some fashion.

Implementing TQM requires a two pronged approach, one working on the cultural change within the business and another on implementing the tools to drive continuous improvement and requires careful management to ensure constancy and focus, usually championed by senior management but involving staff working in the process in all functions, at all levels, thus ensuring that all views and perspectives across the business are taken into account.

Accepting Deming’s basic concept of responsibility for quality, demands that:

Management must learn which parts of any problem are due to the workers and which are due to system problems. Deming stated that 85% of all problems stem from system problems and only 15% are worker related.

Deming demanded that management and workers must all speak a common language, so they can together work on issues that prevent or inhibit quality and productivity. Deming identified Statistics ( SPC ) as this language.

Working in Japan in the post war years, Deming was highly revered by the Japanese and without question was responsible for establishing the Japanese culture of Quality, based on his principles above. Deming, on his return to the West, identified what he called his ‘Deadly Diseases,’ which he saw as being the characteristics of western style management and which inhibit quality and productivity. To address these diseases, Deming than created his 14 Points of management principles.

Deadly Disease Number 1 – Lack of Constancy of Purpose

Many companies do not have a Mission Statement. Developing a mission and defining an organisation purpose in not a simple or easy task. It is difficult to consider all the options and ramifications of a company’s purpose. However, if top management does not do this, it cannot expect employees to be aligned with them. With a clear Mission Statement, functions and departments can develop long term plans that support the company purpose. Such a unified effort gets more results than one pulling in all directions. Vacillation between following and deviating from a common direction is costly and counterproductive. Lack of a Mission Statement can ultimately result in variation in the company direction and can cause a company to lose its competitive position and market share.

Any Mission Statement should identify management’s priorities and of course one of these must be Quality. Formulating Mission Statements and objectives is a starting point for a company’s quality improvement effort. Having a Mission Statement will not solve quality problems but the statement can help all employees focus their efforts towards a common cause.

In summary, the Mission Statement communicates management’s priorities to all areas of the company. In turn departments must develop their own long term plans consistent with the Mission Statement and managements priorities. This consistency of direction enables everyone to make short and long term decisions that are tied to the organisations objectives.

Deadly Disease Number 2 – Emphasis on Short Term Profits

Management make short term business decisions that are in fact harmful to the long term health of the business. Examples of this focus include:

• Cutting back research & development, which may provide for higher short term profits but pose catastrophic consequences when company products become outdated or obsolete.

• Shipping defective, inferior or incomplete products just to meet current production goals. For example products which would not have been shipped in the first few weeks of the month become acceptable in the last week of the month before close off. Deming stated that “Defects are not free and someone gets paid for making them. Service, warranty, rework and retesting costs can eat up future profits.”

• Allowing insensitive approaches to warranty, service and customer satisfaction will result in lost customers over the long term.

• Eliminating or reducing preventative maintenance of equipment.

• Eliminating or reducing training. It is easy to eliminate or reduce formal training and expect new staff to learn from existing staff but the resulting costs for improperly completed work are far higher than the costs of proper training.

Management may not voluntarily make short term decisions that are harmful to the long term health of the business but rather it may be pressured to emphasise short term profits, because of the underlying situation in western economies which does not exist in Japan. In publicly held companies there is pressure to provide dividends to shareholders or support those shareholders who buy and sell shares for short term returns. Typically in Japan, major companies are owned by a small number or shareholders or banks who are focused on long term asset growth.

Deadly Disease Number 3 – Annual Evaluation of Performance & Reward Rating

Deming suggested that western industry was focused on rewarding staff in the wrong way and that it was in fact rewarding short term performance only, encouraging rivalry, fear and politics and not encouraging teamwork.

Deming suggested that management should be promoting teamwork and that the rewards system needs to focus on this attribute and that piece part pay and management by objectives does not in fact achieve this.

Deming recognised that employee performance will vary on a normal distribution basis due to the fact they have need varying levels of challenge, perform different jobs, have varying levels of training etc. Whatever the reason, Supervisors should be constantly reviewing staff performance and correcting reasons for any staff who fall outside normal limits. Through an annual review process, all that in fact happens is we adjust the variation for staff inside limits and extend variation. Even when management reaches the situation where all staff are inside normal limits it should be working continuously on reducing variation and improving the mean average.

Deming argued that annual review processes, in fact encouraged supervisors and managers to forget their responsibility of continuous leadership and improvement of productivity and the workplace.

Deadly Disease Number 4 – Mobility of Management

Management changes or in fact any staff changes within a business lead to instability. In western business, Deming argued, staff who do not move for promotion are considered to lack ambition and the drive to improve themselves. This compared to Japan where staff often remain with the same company for life.

While this situation may have changed since Deming’s statement, the principles remain sound in that instability in staffing leads to changes in focus and process at all levels, including existing staff bending to adapt to new management approaches. Changes in staff also leads to loss of productivity with new staff facing a learning curve.

Deadly Disease Number 5 – Running a Company on Visible Figures Only

Deming asserted that western style companies focus on management by financial accounts which completely overlooking unknown or unknowable numbers and variables such as:

• Lost customers due to poor quality, unreliable products, poor delivery performance, and management arrogance.

• Frustrated workers.

• Interdepartmental rivalries.

• Brand Loyalty

Deming argued that customer focus is paramount and business must be so focused.

Other Deadly Diseases Deming did in fact cite a range of other diseases but most of these were focussed particularly on American industry and included subjects such as medical and liability costs and we will not focus on those here.


VA - VALUE ADDED or VALUE ADD - is a term which refers to those activities, processes and resources that add value to a product, process or service in the eyes of the customer and as such they would be willing to pay for it. Further, removal of the activity, process or resource would have a negative impact on the fit, form or function of the product or service.

Lean principles focus on eliminating all waste or Non Value Add processes (refer to definitions of Non Value Add, Muda, Mura & Muri, along with the 7 Wastes above). That said and while there are activities, processes and resources which may be seen as waste in the eyes of the customer or Non Value Add, these may be necessary to conduct and manage the business. Such processes or activities will comprise areas such as accounting, legislation compliance etc. but of course they do remain, strictly speaking, waste and should be a key area of continuous improvement to reduce their financial impact on the business.

Lean introduces a tool known as Value Stream Mapping (see description below) which focuses on identifying the process and segregating Value Add and Non Value Add processes.

Business Engineering's Lean Performance Indicator (Value Analysis) focuses on Value Stream Mapping and segregating Value Add processes from Non Value Add.

VALUE STREAM - refers to the sequence of events which are required to produce a product, deliver a service or complete a process.

VALUE STREAM MAPPING - is a ‘Lean’ tool developed by Toyota to support the analysis and design of the Value Stream process flow, enabling Value Add and Non Value Add activities to be clearly differentiated. VSM is also a key tool used within the Lean Performance Indicator (Value Analysis) which focuses specifically on this subject.

Value Stream Mapping may be considered a pictorial flow chart in some sense, using standard symbols, as below, to identify the flow of information and materials but importantly identifying data on quantum at each stage, including:

Customer demand (Takt Time)

Cycle Time

Value Add Times

Non Value Add Times including Transport Times

Set Up Times

Materials or Inventory Levels

As with any change process, the Plan Do Check Act ( PDCA ) principle should be applied and a current state VSM prepared first before attempting to prepare an improved VSM.

The example shown below, of a Value Stream Map, identifies a number off issues which would require attention and Kaizen Group (see above) focus to resolve:

Fundamentally the Takt Time (see definition above) is 4.5 minutes but our Cycle Time (see definition above) is more at 13.8 minutes, meaning of course that we cannot keep pace with customer demand or pull and the production process and supply chain needs attention.

Areas for attention are:

There is insufficient information on the Kanban set up with the Supplier of Aluminium ingots to assess if the Kanban set up is appropriate. Review using Kanban formula as defined in Lean Performance Indicators section of our web site

Parts ‘B’ & ‘C’ are being ordered in lots of 300 each but production batches are only 200, creating a stockpile in the Warehouse. Consider Kanban arrangements.

Production rate is driven on a push basis from the Foundry and not on a pull basis to meet customer demand.

A substantial amount of Non Value Add time exists in the overall process and requires improvements through Kaizen activity,

There is significant imbalance between process steps and this leads to ‘waste’ (see definition above). Production balancing or levelling is required. Refer to Lean Performance Indicators.

In process inspection looks to be identifying quality issues with high levels (5%) reject rates at two different steps. Product design, specifications and process capability may all require review and further information/data should be compiled using tools such as Fishbone Diagrams, Check Sheet, Control Chart, QFD & CTQ Tree, Six Sigma DMAIC, Histogram, SGA, Kaizen, Pareto Analysis etc. (refer to individual definitions above.)

The high reject rate of parts is also generating stockpiles of parts ‘B’ and ‘C’ which are being drawn from stores in lots of 200.

Set Up times are significant for the Foundry and should be examined using SMED principles.

VISUAL CONTROL & VISUAL MANAGEMENT - is a key technique used within Lean environments and even in everyday life which recognises that control, management and reporting of processes and activities is easier, more effective and more likely to be mistake proof using visual signals.

We have covered many such signals here on our web site and these include as examples:

• Colour Used in traffic light convention, on reports, gauges, etc. where typically Red is used for outside specification/error, Amber for caution/transition and Green for within specification/okay.

Used to identify work cells and related tooling, Kanbans (see defintion above) etc.

The standard use of colour is prevalent throughout all facets of life to aid identification including for example electrical wiring, piping for gas, water, telecommunications etc., safety equipment etc.

• Symbols

Designed as appropriate to ensure their meaning is easily understood.

• Silhouette

Used on items such as tooling shadow boards to identify where the tools belong and also a means of identifying when tools are missing. Also used for identifying designated spaces for items such as forklifts, jigs & fixtures, storage bins etc.

• Poka Yoke (See definition above).

• Standard Operating Procedures ( SOP’s ) & Standard Work (See definitions above).

• Reports & Graphical Information

Such as Lean Performance Indicators, Pareto Charts, Run Charts, Control Charts, Fishbone Diagrams etc. ( refer to individual definitions above)

• Planning tools and reports including the Heijunka Box (see definition above)

VMI - VENDOR MANAGED INVENTORY - is where the manufacturer or supplier is responsible for maintaining the customers inventory levels. The manufacturer or supplier will, generally in real time and on line, have access to the customers inventory information including stock lines and levels along with actual and forecast sales information. The manufacturer or supplier is responsible for creating and maintaining the inventory at appropriate levels and for raising orders accordingly, based on an agreed basis. VMI systems can also be managed through a Kanban (see above) arrangement.

Not to be confused with consignment stock, VMI stock becomes the property of the customer on delivery, subject to agreed commercial terms. VMI stock, however, may also be provided on a consignment basis.

The process of setting up and managing VMI, is made much easier with modern on line or Electronic Data Interchange ( EDI ) systems, providing transparency and ensuring both parties are aware of and can reconcile stocks, orders, delivery status, sales and invoice status at all times.

Invoiced Quantity for Period = Sales Volume + Stock Level Movement for Period

Commercial Supply Agreements will cover areas which can be varied within a VMI environment such as unsold stocks or expired life stock, use of third party logistics management companies, responsibility for point of sale stocking and restocking etc.

VOC - VOICE OF THE CUSTOMER - refer to QFD, Quality Function Deployment above.


WASTE - refer to 7 Wastes above.

WIP - WORK IN PROGRESS or WORK IN PROCESS - - is one of three levels of manufacturing stock commonly used in stock accounting, these being:

Raw Materials

Work In Progress

Finished Goods

WIP refers to all products which have had some value added to them in the manufacturing process but are not yet complete and are either waiting in buffer storage or in the queue for further processing.

WIP within Lean environments is considered a ‘waste’ and is identified as one of the 7 Wastes (see above), the focus being to reduce stock levels throughout the manufacturing process, producing on a Just In Time ( JIT ) basis.


ZERO DEFECTS - is a quality control practice conceived by Philip Crosby in his book Quality is Free, its focus being to minimise the number of defects and errors in a process, aiming for Zero Defects through doing things right first time.

Zero Defects enables a foundation for Quality Systems and aims to establish the culture and management approach which will support delivery of Zero Defects through four principles:

• Quality is Conformance to Requirements

Customers all have an expectation or requirement of what they wish to get from any given product or service. Zero Defects promotes the achievement of these requirements and no more.

• Defect Prevention is Preferable to Quality Inspection and Correction

Zero Defects promotes the idiom of ‘get it right first time,’ this providing for the lowest cost approach in the longer term, as opposed to reworking and modifying.

• Zero Defects is the Quality Standard

The third principle states that given a specification of acceptable limits for a product or process, nothing less than 100% conformance is acceptable. If however, the customer is able to accept the lower level of quality/specification possible or achieved, then the requirement should be changed accordingly, to once again bring conformance back to 100%.

• Quality is Measured in Monetary Terms – The Price of Non Conformance

The fourth principle recognises that all defects have a hidden cost or ‘waste’ value. Such cost or waste includes inspection time, rework, wasted material and labor, lost revenue and the cost of customer dissatisfaction. Zero Defects calls for the measurement of these costs and steps to eliminate them, promoting that the improvements in quality will more than offset the investment and along the way, support management decision making on a cost benefit basis.