SUBJECT OF SUPPLY CHAIN MANAGEMENT:

LEAN MANAGEMENT

THE CASE STUDY OF

LEAN MANUFACTURING AND INNOVATION:

HOW DOES NIKE DO IT?

Made by:
Group F
Group’s Members:
Ferdian Pradha
Milena Kartika
M. Rizki. Ulin
Veronica Honoris
 CHAPTER I

INTRODUCTION

As we all know, in the world of production management and company operations

as well as supply chain distribution management often experience various problems, both
internal problems and external problems. Each of these problems is connected to each other
and sometimes interrelated so as to form a complex complexity that requires complex
solutions. One of the most common problems experienced is the problem of waste
generated from operational production processes in the industry and also from the supply
chain distribution process. This waste can be in the form of residual material or artificial
products that fail so that it must be further processed before it can be completely disposed
of or it can be non-material waste in the form of errors, negligence and failure of the
operational production system and chain system supply carried out by the company itself.
So that if this is allowed, it can result in a decrease in productivity and a decrease in
performance which makes the operational production process and supply chain distribution
run inefficient.

After going through a long research process carried out by management experts to
find solutions to solve the problem of non-material waste which is increasingly causing
anxiety for various industrial companies. Until finally the JIT (Just in Time) manufacturing
philosophy was born, which became a new foundation in creating a more effective,
efficient, and efficient supply chain production, operational and distribution system
environment, and did not cause a waste of excessive use of industrial resources. non-
material waste. Then from this JIT began to develop after being implemented by Toyota
throughout its industrial environment lines with a few additional points that they found
from their own company so that the TPS (Toyota Production System) was created which
would later become the forerunner of the Lean Production system. Then this Lean
Production has become a new standard for industrial management companies around the
world, one of the world's companies that has successfully implemented the Lean
Production system in its industrial ecosystem is NIKE. where they are able to make an
implementation of Lean Production that is more effective and efficient than its competitors.
[By : Ferdian Pradha Adhitama]
 CHAPTER II

THEORITICAL BACKGROUND

A. The Lean Perspective on Waste (by : Ferdian Pradha Adhitama)

Waste is one of the biggest problems as well as a classic problem experienced by
almost all management fields in a company. Especially in the fields of production,
operations and supply chain, which are the most vital management fields for the
survival of the company. Of course, this waste problem cannot be eliminated forever
because it is interrelated with one another with management. Considering that a waste
is formed because there is value left from the management process and its existence is
no longer useful.

The need for this waste solution has actually been studied since the past few years,
precisely in 1990 lean has grown in popularity and become a major paradigm in both
research and practice (Stone, 2012). With its roots in TPS, lean emphasise waste
reduction. While TPS focus on cost related waste issues, lean extend the concept to
resources in general. The literature review revealed that the definition of waste has its
origins in Ohno’s (1988), Womack and Jones’ (1996), seven wastes or some variant
the seven wastes (e.g. Hines & Rich, 1997; Arbulu et al., 2003; Chen & Meng, 2010).
This is especially true in analyses of papers published after the year 2000 (e.g. Ballard
& Howell, 2003; Chen & Meng, 2010). According to Ohno (1988, p. 54) TPS is a
method to: “thoroughly eliminate waste and enhance productivity”.

As for some other literature, the seven wastes in TPS have influenced subsequent
definitions, such as Liker’s (2009, pp. 50-51) concept of wastes: overproduction,
waiting, conveyance, over-processing, excess inventory, movement, defects, and
unused employee creativity or expertise (the eighth waste). However, TPS is not only
about the elimination of non-value adding activities but also aims to improve the quality
of the product (Jasti & Kodali, 2015). Another definition relates waste to value as “non-
value” (e.g Braglia, Carmignani, & Zammori, 2006; Moyano-Fuentes & Sacristán-Díaz,
2012) and to “all efforts that do not add any value” (Arbulu, et al, 2003, p. 164). Waste
can also be related to the customer opinions (e.g. Arbulu et al., 2003, Hines et al. 2004).
But while lean in a majority of the literature have a similar view of what waste is, the
quality movement lacks this precision and instead has a general definition of poor-
quality-costs (Pettersen, 2009).

Based on the explanation of the literature above, it can be found that there are eight
types of deadly waste that are a problem for management in the company, while the
eight types of waste consist of :
1. Overproduction
Overproduction occurs when manufacturing a product or an element of the
product before it is being asked for or required. It may be tempting to produce
as many products as possible when there is idle worker or equipment time.
However, rather than producing products just when they are needed under the
'Just In Time' philosophy, the 'Just In Case' way of working leads a host of
problems including preventing smooth flow of work, higher storage costs,
hiding defects inside the WIP , requiring more capital expenditure to fund the
production process, and excessive lead-time. Additionally, over-producing a
product also leads to an increase in likelihood that the product or quantities of
products produced are beyond the customer's requirements. In an office
environment, overproduction could include making extra copies, creating
reports no one reads, providing more information than needed, and providing a
service before the customer is ready. Manufacturing overproduction involves
producing more products than demanded through a 'push production system' or
producing products in higher batch sizes than needed.

2. Waiting
The waste of waiting includes: 1) people waiting on material or equipment and
2) idle equipment. Waiting time is often caused by unevenness in the production
stations and can result in excess inventory and overproduction. In the office,
waiting for waste can include waiting for others to respond to an email, having
files waiting for review, effective meetings, and waiting for the computer to
 load a program. In the manufacturing facility, waiting waste can include waiting
for materials to arrive, waiting for the proper instructions to start manufacturing,
and having equipment with insufficient capacity.Some countermeasures for
waiting include: designing processes to ensure continuous flow or single piece
flow, leveling out the workload by using standardized work instructions, and
developing flexible multi-skilled workers who can quickly adjust in the work
demands.

3. Transportation
Waste in transportation includes movement of people, tools, inventory,
equipment, or products further than necessary. Excessive movement of
materials can lead to product damage and defects. Additionally, excessive
movement of people and equipment can lead to unnecessary work, greater wear
and tear, and exhaustion. In the office, workers who collaborate with each other
often should be close together. In the factory, materials necessary for production
should be easily accessible at the production location and double or triple
handling of materials should be avoided. Some of the countermeasures to
transportation waste includes developing a U-shape production line, creating
flow between processes, and not over-producing work in process (WIP) items.

4. Inventory
Often times it is difficult to think about excess inventory as waste. In
accounting, inventory is seen as an asset and oftentimes suppliers give discount
for bulk purchases. But having more inventory than necessary to sustain a
steady flow of work can lead to problems including: product defects or damage
materials, greater lead time in the production process, an inefficient allocation
of capital, and problems being hidden away in the inventory. Excess inventory
can be caused by over-purchasing, overproducing work in process (WIP), or
producing more products than the customer needs. Excess inventory prevents
detecting production-related problems since defects have time to accumulate
before it is discovered. As a result, more work will be needed to correct the
 defects. In-office inventory waste could be files waiting to be worked on,
customers waiting for service, unused records in a database, or obsolete files.
Manufacturing inventory waste could include broken machines sitting around,
more finished products than demanded, extra materials taking up work space,
and finished products that cannot be sold. Some of the measures for inventory
include: purchasing raw materials only when needed and in the quantity needed,
reducing buffers between production steps, and creating a queue system to
prevent overproduction.

5. Motion
The waste in motion includes any unnecessary movement of people, equipment,
or machinery. This includes walking, lifting, reaching, bending, stretching, and
moving. Tasks that require excessive motion should be redesigned to enhance
the work of personnel and increase the health and safety levels. In the office,
wasted motion can include walking, reaching to get materials, searching for
files, sifting through inventory to find what is needed, excess mouse clicks, and
double entry of data. Manufacturing motion waste can include repetitive
movements that do not add value to the customer, reaching for materials,
walking to get a tool or materials, and readjusting a component after it has been
installed. Some countermeasures for motion include making sure the workspace
is well organized, placing equipment near the production location, and putting
materials at an ergonomic position to reduce stretching and straining.

6. Overprocessing
Over-processing brings us to doing more work, adding more components, or
having more steps in a product or service than what is required by the customer.
In manufacturing this could include using a higher precision equipment than
necessary, using components with capacities beyond what is required, running
more analysis than needed, over-engineering a solution, adjusting a component
after it has already been installed, and having more functionalities in a product
than needed. In the office, over-processing can include generating more detailed
 reports than needed, having unnecessary steps in the purchasing process,
requiring unnecessary signatures on a document, double entry of data, requiring
more forms than needed, and having an extra step in a workflow . One simple
way to counter over-processing is to understand the work requirements from
the standpoint of the customer. Always have a customer in mind before starting
work, produce to the level of quality and expectation that the customer desires,
and make only the quantities needed.

7. Defects
Defects occur when the product is not fit for use. This typically results in either
reworking or scrapping the product. Both results are wasteful as they add
additional costs to the operations without delivering any value to the customer.
Here are four countermeasures for defects. Firstly, look for the most frequent
defect and focus on it. Secondly, design a process to detect abnormalities and
do not pass any defective items along the production process. Thirdly, redesign
the process so that does not lead to defects. Lastly, use standardize work to
ensure a consistent manufacturing process that is defect free.

8. Neglect of Human Talent (Unused Talent)

Even though it was not part of the Toyota Production System (TPS), many
people are well aware of the 8th waste - the waste of human potential. The 8th
waste is also described as the waste of unused human talent and ingenuity. This
waste occurs when organizations separate the role of management from
employees. In some organizations, management's responsibility is planning,
organizing, controlling, and innovating the production process. The employee's
role is to simply follow orders and execute the work as planned. By not
engaging the frontline worker's knowledge and expertise, it is difficult to
improve processes. This is due to the fact that the people doing the work are the
ones who are most capable of identifying problems and developing solutions
for them. In the office, non-utilized talent could include insufficient training,
poor incentives, not asking for employee feedback, and placing employees in
 positions below their skills and qualifications. In manufacturing, this waste can
be seen when employees are poorly trained, employees not knowing how to
effectively operate equipment, when employees are given the wrong tool for
the job, and when employees are not challenged to come up with ideas to
improve the work.

Of the eight wastes, we can actually identify and develop strategies to eliminate or
simply reduce the quantity of waste in the production management process and supply
chain distribution. The first step to reducing waste is recognizing that they exist and having
an effective process for identifying them. Value Stream Mapping (VSM) is a Lean
management method for analyzing the current state and designing a future state. It shows
the flow of information and material as they occur. VSM is an effective tool for mapping
out the processes involved, displaying the relationship between production processes in a
visual manner, and for separating value-added and non-value-added activities.

In order to identify wastes, use the VSM and start with the end customer in mind.
Work backwards from the end customer to the start of the production processes. Document
instances of the 8 wastes in the processes and develop a plan for eliminating or reducing
them. Continue challenging your team to find more wastes and continuously improve your
processes. Engage with the frontline workers and elicit their ideas for improvement. As
your team begins reducing efficiencies they will gain more confidence in their problem-
solving capabilities and over time reducing waste becomes a part of their daily routine.

[By : Ferdian Pradha Adhitama]

B. The Lean Perspective on Inventory (by : Milena Kartika)

Lean inventory is the perfect solution for any manufacturer experiencing

difficulties due to a change in the market, or for start-ups who have limited capital. In this
article, we investigate exactly what it is the lean method, the lean inventory principles
and how you can make it work for your business. Lean inventory is a term used by
producers to eliminate as much waste as possible from their production operations. Waste
doesn't just mean the stuff left over. This can involve waiting times from bottlenecks or
transporting items (whether through the shop floor or to a customer). Lean inventory
management can be accomplished by manufacturers redesigning their routing production,
rethinking how they keep inventory, or even eliminating the process from their
production that is not necessary.

Lean inventory management is the measured method to maximize the value of the
company's inventory by finding and removing the waste left behind from production.
You do this by evaluating and streamlining the effort required to manufacture a product
through the continuous improvement of your production line. Until manufacturers start
using lean inventory management, they will typically produce their products on the basis
of demand planning (or even create and store what they think the consumer may want).
However, with a lean inventory, the retailer estimates and removes their surplus
inventory and stores only what they need within a fixed timeframe.

To achieve lean inventory management as a manufacturer, you will need to

understand the five lean inventory principles when optimizing your manufacturing sector.
After all, there is waste in all areas of the business-from the front office to the warehouse.
Holistically, the inventory management methodology refers to a systematic approach to
maximizing the value of the inventory by eliminating waste by continuous improvement,
all in search of perfection. Excessive waste of materials, time or other resources can
easily be present in your production line. And these lean inventory principles are:
1. Value
The first concept of lean manufacturing is to determine the value of your product
from the point of view of the consumer. Adapt your goods and processes to
satisfy consumer demand and, over the years, when that demand shifts, it might
be time to reconsider your product or introduce new product lines.

2. Flow
You are going to need to consider how your product moves into your warehouse.
If you have visualized your end goal (customer value), you can start mapping all
the processes and steps needed by creating a value stream. Manufacturing
software that offers real-time data from your production lines is helpful in this
endeavor. From the sourcing of raw materials to the final delivery of the product,
define all the actions needed to carry the product through the manufacturing
process.

3. Pull
The only time you need to pull your inventory is when the customer places an
order. The technique behind this is to eliminate excess inventory by starting
production only once demand is there, as opposed to predicting demand and
stocking finished products. The lean production idea of pull is the opposite of how
most people think about manufacturing. Instead of purchasing raw materials and
beginning processes to produce a product before orders are placed by the
consumer, often generating stocks, the producer is only going towards production
and inventory procurement when orders are placed. Efficient commodity pull
aims to remove waste from production projections that have not been realized.
Lean manufacturing thus uses an on-demand production model and ensures a just-
in-time inventory flow. If you run lean, create a supply chain that does not require
stockpiling materials and refrain from constructing goods until consumer demand
is understood.
 4. Responsiveness
Be prepared to adapt to transition. This will also entail some monitoring of the
output of your company. The idea, however, is to enact reform, track the results,
trim the fat, monitor the results, and keep cycling through these steps. We need to
be alert to external changes, such as economics or government policies that can
affect you. And you also need to be prepared for internal adjustments, such as
stock reduction and the effects of doing so.

5. Perfection
The greatest force behind the achievement of lean inventory management is the
relentless pursuit of excellence. We will need to constantly refine our inventory
management, the consistency of your goods, their cycle time, our productivity and
the cost of manufacturing. Your whole corporate thinking should be the aim of
manufacturing perfection – from the top management level to the shop floor. All
should think lean, get rid of waste, troubleshoot the cause of production problems,
and remove unnecessary tasks and materials. Service quality and increased
productivity are a community effort that can’t succeed in isolation. Each and
every employee must be part of the overall lean tech transformation.

There is still space for quality improvement, and running lean can definitely help.
Yet your shop floor workflows, procedures, and data systems are your own, and you
shouldn't have to reinvent the wheel to run lean. Indeed, making unnecessary changes or
workarounds to the in-house operations will fight lean concepts that aim to root out and
reduce manufacturing waste – including product waste that results in scrap material,
unproductive workflows that result in wasted time, and unnecessary activities that waste
human resources.

Lean manufacturing, also known as lean production, is a concept focused around

the reduction of waste within the system. First introduced by the Toyota Production
System in the 1990s, it has been commonly used in the manufacturing sector. Today,
hundreds of manufacturing firms adopt the concept of lean manufacturing in order to
minimize waste and boost their overall operations. For lean manufacturing operations, the
bottom line is to create efficiency and eliminate waste – while also improving product or
production quality and reducing costs.

• Improved Quality
Today, manufacturing firms must concentrate on developing and
delivering high-quality goods to resolve competition. Although there are
hundreds of different ways to enhance the quality of manufactured goods,
lean production will help. By eliminating needless waste, businesses will
turn their attention to the product at hand, spending more time and money
to make the product better.

• Eliminate Waste
Manufacturers tend to generate a lot of waste, more than businesses
working in other industries; that is just the essence of the manufacturing
industry. However, manufacturing companies can reduce their waste
generation by focusing on the principles of lean production. Reducing
energy consumption, opting for recycled products and promoting other
green, eco-friendly activities are only a few ways that businesses can
accomplish this.

• Reduce Time
Companies that use lean production would inevitably benefit from faster
production times. This is due to the fact that there is less waste and greater
overall productivity at the workplace. Of course, faster production times
would help a manufacturing business in a variety of different ways: faster
production means lower overheads and more sales, making lean
manufacturing well worth it in the long run.

• Reduce Total Cost

And finally, your lean manufacturing plan can reduce your overall
manufacturing costs, including operational costs. In this way, the company
can deliver a higher quality product at a fair price. Reduced waste, reduced
 processing times, reduced operations – all of which minimize costs and
raise margins.

Lean manufacturing, as a rule of thumb, is known to be a positive type of business

practice as it encourages manufacturers to see how they can become more effective,
develop their manufacturing processes and encourage an active form of management.
You may ask, "By using lean principles, all inventory is considered waste? "This is partly
true. You need to regard finished goods (and the output of finished goods) as value. If
you've finished products sitting on a shelf, taking up space and rising prices, it doesn't
have much value and is being wasted.

Lean inventory control uses the principles of TQM and Six Sigma to remove
them. The effect is generally a decrease in costs and an increase in efficiency. Value
Analysis (VA) may be used to reduce costs and improve efficiency. Six Sigma uses the
Voice of the Customer (VOC) methods, the effect goes beyond the wishes of the
customer.

Lean management is a mixture of methods, philosophy and a system. As a guide,

businesses may use the principles to choose the best strategy or approaches to improve
what needs to be changed. As a theory, lean management emphasizes the minimization or
reduction of excesses on all resources used in the different operations of the organization.
As a system, businesses may use lean management to reduce their costs and boost
customer loyalty. Building and maintaining a lean inventory management revolves
around six main attributes: These are:

• Demand management
Supplying inventory as ordered by the customer. In order to handle demand
efficiently, businesses need to schedule their sales and activities, track inventory
management practices, demand signal and demand cooperation.
• Cost and waste reduction
Although lean inventory management can tend to concentrate on minimizing
waste and costs, this should only be the case to the degree that it does not have a
negative effect on the value of the consumer.
 • Process standardization
This allows a continuous flow of inventories within the business. Some inhibitors,
such as transport, batch processes and queue function, can slow down inventory
delivery.

• Industry standardization
Process and product standardization among traditional partners can still lead to
waste, particularly when common components are not optimally standardized.
While standardization can improve service quality and gain consumers from using
the products, it also reduces the proprietary nature of the product, making other
competitive factors more relevant.

• Cultural change
Inventory partners, from manufacturers to consumers, must work as a team to add
value to the end consumer.

• Cross-enterprise collaboration
Cross-enterprise collaboration through the use of teams can help identify value
and recognize value sources to optimize the value-added provided to customers.

Lean management is ideally suited to high-volume firms, as the aim of mass

production is low-cost manufacturing, which is a core lean philosophy alongside
improved product quality. What's more, minimal variations and customization of the
goods make for a simpler production process, making it easier for companies to break
down individual processes and find ways of quality improvement. The advantages of
implementing lean inventory management methods are clear: decreased stock-keeping
unit counts and inventory levels, increased use of standards in procedures and products,
enhanced partnerships and a general reduction in the cost of goods produced relative to
companies that do not apply lean principles. The bottom line is the lean supply chain and
inventory management.
 In the other hand, if your customers demand varying degrees of customization in
the goods you sell, lean management is unlikely to be right for you, as this involves
constant change in your production line. Whether or not you want to deploy the
methodology, certain main elements can still be taken from lean management practices.
All companies should concentrate on waste reduction, aim for quality improvement and
eventually become customer-centric in order to achieve growth and stay competitive.

[By : Milena Kartika]

C. Recent Development in Lean Thinking (by : Veronica Honoris)
It shouldn’t be surprising that businesses have looked for ways to combine the
Lean philosophy with other management efforts. One such hybrid is Lean Six Sigma. a
method that relies on a collaborative team effort to improve performance by
systematically removing waste and reducing variation.
Lean focuses on waste reduction by streamlining a process. Six sigma focuses
on preventing defects through problem solving. Although Lean and Six Sigma are
different processes, they are complementary and share many similarities that allow
them to flow together seamlessly.
First, both Lean and Six Sigma stress the fact that the customer defines the value
of a product or service. This means that when processes are examined, the importance
or necessity of steps in the process should be examined through the eyes of the
customer. Also, Lean and Six Sigma utilize process flow maps in order to better
understand the flow of production and identify any wastes. Furthermore, both rely on
data to determine which areas of production need improvement in efficiency and to
measure the success of improvements. Finally, as a result of implementing Lean and
Six Sigma, efficiency typically improves and variation decreases. Efficiency and
reduction in variation go hand-in-hand, with improvement in one resulting in an
improvement in the other.
Lean Six Sigma Tools:

1. Define the system, the voice of the customer and their requirements, and the project
goals, specifically.

2. Measure key aspects of the current process and collect relevant data; calculate the
'as-is' Process Capability.

3. Analyze the data to investigate and verify cause-and-effect relationships. Determine

what the relationships are, and attempt to ensure that all factors have been considered.
Seek out root cause of the defect under investigation.

4. Improve or optimize the current process based upon data analysis using techniques
such as design of experiments, poka yoke or mistake proofing, and standard work to
create a new, future state process. Set up pilot runs to establish process capability.
5. Control the future state process to ensure that any deviations from the target are
corrected before they result in defects. Implement control systems such as statistical
process control, production boards, visual workplaces, and continuously monitor the
process. This process is repeated until the desired quality level is obtained.

Through implementation of Lean Six Sigma, organizations can expect the

following beneficial outcomes:

• Increase in Profit: As a result of eliminating waste and improving the quality of

production, Lean Six Sigma reduces costs for organizations and increases profitability.
General Electric reportedly experienced a profit-cost savings exceeding $2 billion.
• Standardized and Simplified Processes: With the help of value stream mapping,
Lean Six Sigma eliminates wastes in processes and unnecessary steps to stream-line
production. The processes are simplified so that they are easier to follow and less likely
to lead to error. The simplified processes will also reduce time, leading to a decrease in
overhead costs.
• Decrease in error: With the simplification in processes steps and a detailed
investigation into the main causes of error and waste in the organization, Lean Six
Sigma drastically reduces errors such as defects and miscalculations.
• Employee Performance/Development: Lean Six Sigma stresses the importance of
the ideas and observances of individual employees to the overall success of an
organization. With Lean Six Sigma, the feeling of self-importance and significance
increases among employees and leads to an increase in motivation and better job
performance.
• Value to Customer: Lean Six Sigma allows companies to improve their processes
and the quality of their products. In turn, they are able to produce more products at a
cheaper price with less error. Customer satisfaction will increase, which will then lead
to an increase in customer loyalty.

Some practitioners and researchers have moved beyond Lean production to

what can be called Lean supply chain management. In a nutshell, Lean supply chain
management seeks to minimise the level of resources required to carry out all supply
 chain activities. Lean principles are applied to eliminate waste in a firm’s sourcing and
logistics activities, as well as within the firm’s internal operations. But it doesn’t end
there. The Lean philosophy is applied to all relevant flows –physical, informational,
and monetary– and, where possible, to supply chain partners. This means that firms
might need to work closely with key partners to eliminate waste within their operations.

[By : Veronica Honoris]

D. Kanban System (by : M Rizki Ullyn Nuha)

Kaban system is means signal, which is a concept related to Lean Manufacturing and Just
In Time (JIT). According to its originator, Taiichi Ohno, kanban is one way to record JIT.
Kanban is not an inventory control system, but rather a regulatory system that helps
determine what, when, and how much a product should be made

What is the Kanban Method

While kanban was introduced by Taiichi Ohno in the manufacturing industry, it is David
J. Anderson who was the first to apply the concept to IT, Software development and
knowledge work in general in the year 2004. David built on the works by Taiichi Ohno,
Eli Goldratt, Edward Demmings, Peter Drucker and others to define the Kanban Method,
with concepts such as pull systems, queuing theory and flow. His first book on Kanban

The Kanban Method is a process to gradually improve whatever you do – whether it is

software development, IT/ Ops, Staffing, Recruitment, Marketing and Sales, Procurement
etc. In fact, almost any business function can benefit from applying the principles of the
Kanban Methodology.

The Kanban body of knowledge has abstracted and benefited from the works of various
thought leaders since the original book was written! People such as Don Reinertsen
(author of Principles of Product Development Flow), Jim Benson (pioneer of Personal
Kanban) and several others.

Foundational Principles :

• Start with what you are doing now: The Kanban Method (hereafter referred to as
just Kanban) strongly emphasizes not making any change to your existing setup/
process right away. Kanban must be applied directly to current workflow. Any
changes needed can occur gradually over a period of time at a pace the team is
comfortable with.
 • Agree to pursue incremental, evolutionary change: Kanban encourages you to
make small incremental changes rather than making radical changes that might lead
to resistance within the team and organization.

• Initially, respect current roles, responsibilities and job-titles: Unlike other methods,
Kanban does not impose any organizational changes by itself. So, it is not necessary
to make changes to your existing roles and functions which may be performing well.
The team will collaboratively identify and implement any changes needed. These
three principles help the organizations overcome the typical emotional resistance
and the fear of change that usually accompany any change initiatives in an
organization.

• Encourage acts of leadership at all levels: Kanban encourages continuous

improvement at all the levels of the organization and it says that leadership acts
don’t have to originate from senior managers only. People at all levels can provide
ideas and show leadership to implement changes to continually improve the way
they deliver their products and services.

6 Core Practices of the Kanban Method

• Visualize the flow of work: This is the fundamental first step to adopting and
implementing the Kanban Method.

This can be in the form of stickies or cards with different colors to signify either different
classes of service or could be simply the different type of work items.

• Limit WIP (Work in Progress): Limiting work-in-progress (WIP) is fundamental to

implementing Kanban – a ‘Pull-system’. By limiting WIP, you encourage your
team to complete work at hand first before taking up new work. Thus, work
currently in progress must be completed and marked done. This creates capacity in
the system, so new work can be pulled in by the team. Initially, it may not be easy
to decide what your WIP limits should be. In fact, you may start with no WIP limits.
The great Don Reinertsen suggests (he did so at one of the Lean Kanban
 conferences) that you can start with no WIP limits and simply observe the initial
work in progress as your team starts to use Kanban. Once you have sufficient data,
define WIP limits for each stage of the workflow (each column of your Kanban
board) as being equal to half the average WIP.

• Manage Flow: Managing and improving flow is the crux of your Kanban system
after you have implemented the first 2 practices. A Kanban system helps you
manage flow by highlighting the various stages of the workflow and the status of
work in each stage. Depending on how well the workflow is defined and WIP
Limits are set, you will observe either a smooth flow within WIP limits or work
piling up as something gets held up and starts to hold up capacity. All of this affects
how quickly work traverses from start to the end of the workflow (some people call
it value stream). Kanban helps your team analyze the system and make adjustments
to improve flow so as to reduce the time it takes to complete each piece of work.

• Make Process Policies Explicit: As part of visualizing your process, it makes sense
to also define and visualize explicitly, your policies (process rules or guidelines)
for how you do the work you do. By formulating explicit process guidelines, you
create a common basis for all participants to understand how to do any type of work
in the system. The policies can be at the board level, at a swim lane level and for
each column.They can be a checklist of steps to be done for column.

• Implement Feedback Loops: Feedback loops are an integral part of any good
system. The Kanban Method encourages and helps you implement feedback loops
of various kinds – review stages in your Kanban board workflow, metrics and
reports and a range of visual cues that provide you continuous feedback on work
progress – or the lack of it – in your system.While the mantra of “Fail fast! Fail
often!” may not be intuitively understood by many teams, the idea of getting
feedback early, especially if you are on the wrong track with your work, is crucial
to ultimately delivering the right work, the right product or service to the customer
in the shortest possible time. Feedback loops are critical for ensuring that.
 • Improve Collaboratively, Evolve Experimentally (using the scientific method): The
Kanban Method is an evolutionary improvement process. It helps you adopt small
changes and improve gradually at a pace and size that your team can handle easily.
It encourages the use of the scientific method – you form a hypothesis, you test it
and you make changes depending on the outcome of your test. As a team
implementing Lean/ Agile principles, your key task is to evaluate your process
constantly and improve continuously as needed and as possible.

Practices of the Kanban

1.Visualize the flow of work: This is the fundamental first step to adopting and
implementing the Kanban Method.

2. Limit WIP (Work in Progress): Limiting work-in-progress (WIP) is fundamental to

implementing Kanban – a ‘Pull-system’. By limiting WIP, you encourage your team to
complete work at hand first before taking up new work.

3. Manage Flow: Managing and improving flow is the crux of your Kanban system after
you have implemented the first 2 practices.

4. Make Process Policies Explicit: As part of visualizing your process, it makes sense to
also define and visualize explicitly, your policies (process rules or guidelines) for how you
do the work you do.

5. implement Feedback Loops: Feedback loops are an integral part of any good system.

6. Improve Collaboratively, Evolve Experimentally (using the scientific method): The

Kanban Method is an evolutionary improvement process. It helps you adopt small changes
and improve gradually at a pace and size that your team can handle easily.
The concept kanban work

Kanban is a non-disruptive evolutionary change management system. This means that the
existing process is improved in small steps. By implementing many minor changes (rather
than a large one), the risk to the overall system is reduced. The evolutionary approach of
Kanban leads to low or no resistance in the team and the stakeholders involved.

The first step in the introduction of Kanban is to visualize the workflow. This is done in
the form of a Kanban board consisting of a simple whiteboard and sticky notes or cards.
Each card on the board represents a task.

The concept of FLOW

At the core of Kanban is the concept of “Flow”. This means that the cards should flow
through the system as evenly as possible, without long waiting times or blockages.
Everything that hinders the flow should be critically examined. Kanban has different
techniques, metrics and models, and if these are consistently applied, it can lead to a culture
of continuous improvement (kaizen).

Kanban WIP Limits

A key aspect of Kanban is to reduce the amount of multi-tasking that most teams and
knowledge workers are prone to do and instead encourage them to “Stop Starting! And
Start Finishing!”, a mantra coined by Dr. Arne Roock WIP – Work-in-Progress – Limits
defined at each stage of the workflow on a Kanban board encourage team members to
finish work at hand and only then, take up the next piece of work.

Modern-Day Kanban

With the development of technology, Kanban has been also continuously improving.
Digital Kanban board solutions have been developed to overcome the problems arising in
remote teams.
 1. Easy access for remote team members
Nowadays, teams are often distributed all over the world. They cannot work on a physical
whiteboard and thus need a digital one they could access from anywhere to be more agile.
Kanban boards in the cloud are the most effective way to get everyone on the same track.
They provide access to all of the information from any device at any time and show actions
live.
2. Flow analytics
Moreover, Kanban software allows for a sophisticated analytical process to help you track
performance in detail, discover bottlenecks, and implement the necessary changes.
3. Integrations with other tools
Digital boards are also easy to integrate with other systems. They can give an extremely
valuable perspective of the whole process, save time, and increase efficiency.

4. Workflow automation
The online Kanban solution allows you to automate some parts of your processes and save
valuable time. With custom automatons, any typical workflow can be made more efficient.

Kanban in a nutshell

A Kanban system is more than sticky notes on the wall.

A Kanban system is more than sticky notes on the wall. The easiest way to understand
Kanban is to embrace its philosophy and apply it to your daily work. If you read, understand,
and resonate with the four core principles, the practical transition would seem logical and
even inevitable.
Visualizing workflow, setting WIP limits, managing flow, ensuring explicit policies, and
collaborative improvement will take your process far beyond you could think. Remember
to organize regular feedback loops, and all these pieces together will reveal Kanban's real
power.
In Summary

Trying to learn what is Kanban could be hard at first but now that you know what it is, you
can make the most out of the main benefits of Kanban:

1. Physical and digital Kanban boards help you visualize your work

2. Kanban is easy to adopt and - just start with what you have

3. WIP limits empower you to become more efficient

4. The Kanban principles and practices offer an evolutionary path towards agility without
disrupting the current processes

[By : M Rizki Ullyn Nuha]

 CHAPTER III

CASE STUDY

Producing goods cheaply overseas has become a strategic necessity for many
producers in a wide variety of industries. But the growth of the global supply chain has
also created a new class of ethical questions, particularly for those in management roles in
global companies. Like so many ethical issues, those related to labor conditions tend to be
seen as black-and-white. Working conditions in overseas factories are perceived by many
to be inherently exploitative, a perception fueled by a series of extremely effective popular
campaigns aimed at motivating change in corporate behavior in this area. In several high-
profile instances, these campaigns documented the physically taxing work, the long hours
and the exposure to potentially unhealthy conditions facing many overseas factory workers.

A great deal about this transition toward corporate citizenship can be learned by
looking at the companies that have been attempting to navigate it. The changes that Nike
has made to its supply chain constitute one of the most compelling stories of supply-chain
evolution in the past half century. Few companies have received more public attention for
the challenges and mistakes in the human aspect of their supply chain than Nike, but in
turn, few companies seem to have ultimately taken as many steps to respond to these
criticisms and to rethink their very manufacturing process.

Nike has begun to make its manufacturing systems leaner, a practice most
commonly used in automobile manufacturing. Historically, footwear and apparel were
produced using long assembly lines, with each factory worker trained in a single task,
representing a particular stop on the line. In contrast, lean manufacturing trains workers in
teams, providing them with a variety of skills and allowing each team the ability to
troubleshoot and correct problems with its production in real time. This approach aims to
minimize waste—both physical waste and the cost of inefficiently used time—and further
empowers workers. Nike currently produces approximately a third of its footwear using
lean assembly systems and aims to have 90 percent of its footwear produced this way by
the end of fiscal year 2011.

Nike’s changing relationship with its overseas suppliers serves as an interesting

illustration of the broader trends in global-supply-chain optimization and management. In
response to public pressure and an internal strategy shift, Nike evolved from a model
focused on extracting as much value as possible from factory workers toward whom the
company felt little responsibility to a strategy that includes maintaining market leadership
by cultivating and protecting strong relationships with its employees and optimizing
effectiveness. Unlike historical models where the company focused primarily on its
relationship with the consumer, Nike is now attempting to build a model where the needs
and demands of the consumer are balanced against the needs and demands of its suppliers
and factory employees. While it will take time to fully evaluate Nike’s success in reforming
its supply chain, this shift in attitude serves as a powerful illustration of the ways that global
trade requires companies to think holistically about creating value and ultimately remaining
successful.

[By : Veronica Honoris]

It’s quite interesting to see that ‘lean manufacturing’ has not just found prominence in the
world of manufacturing but has now reached many other industries including health care,
service providers and even military. They may all have unique implementations but the
lean thinking is universal. We even saw a few examples like Dell, Seattle Children’s
hospital, Starbucks and Toyota in this week’s readings. The reason why lean
implementation can be applied to almost any industry is because its goal is to increase
value-added work by eliminating waste. It is designed to improve customer satisfaction,
throughput time, employee morale, inventory management and overall productivity of the
company. In this blog, I will mainly describe how Nike has reaped benefits from this
approach.

Nike has significantly improved its manufacturing by reducing both waste and wasted
time as its sustainability agenda, therefore achieving more efficiency in their supply
chain. Amongst these improvements are: -
1. 50% reduction in defect rates
2. 40% faster lead times
3. 20% improvement in productivity
4. 30% reduction in time taken to introduce a new model.
Lean manufacturing has definitely changed Nike’s business for good. It has provided
many benefits like improved quality, reduced costs and shorter lead times while reducing
human effort, manufacturing space and investment in new tools. Because of all the above
benefits, it makes complete sense for organizations to adopt ‘lean manufacturing’
methods. But the question is how easy is this transition - from traditional manufacturing
to lean manufacturing processes? Does it always produce good results? Are there any
risks involved?

I think the answer to the first question depends on the mindset of the individuals in the
company. Lean manufacturing opposes traditional methods that support large inventory,
economic order quantities and high capacity utilization. Therefore, it may result in cultural
issues. It’s difficult for people to believe in a new system as they have worked in the
company for a long time and are resistant to change. In such a situation, it’s extremely
important for the managers to help workers understand lean and why it’s a success to
reduce their resistance. In a lean approach, it’s mainly the people who make the difference,
so complete support of the whole organization is required. It’s also possible that a company
may fail in his attempt to implement lean due to lack of understanding of core lean
principles. Successful implementation of lean requires additional training. Another critical
element in implementing lean successfully is finding reliable suppliers and building good
relationships with them. A problem with a supplier can be disastrous while keeping
minimal inventory and supplies. Therefore, before jumping into “Lean Manufacturing
Bandwagon”, companies should understand the risks, tradeoffs and commitments involved
in adopting this approach. However, if implemented successfully, it can provide great
competitive advantages to a company through increased revenue, market shares and profit
growths.
[By : M.Rizki Ullyn Nuha]
 CHAPTER IV

DISCUSSION

Although the proximal objectives of lean are to improve manufacturing

performance, we hypothesize that replacing traditional manufacturing practices with lean
will also result in improved social performance. We posit two mechanisms, which may
operate in tandem, that link lean manufacturing to improved workplace standards. The
labor relations mechanism holds that increased efforts to motivate and retain production
workers under lean manufacturing result in improved terms of employment, such as wages
and benefits. The management systems mechanism posits that new managerial capabilities
lower the costs of complying with social performance standards.

Facing supply chain challenges in delivery time, product quality, and work place
conditions, in the late 1990s, Nike began a search for management interventions for its
supply base. In 2002, Nike secured commitments from long-term footwear suppliers to
implement the lean management and production system it had developed, and a dedicated
training center wasestablishedin2004totrainbothfactorymanagers and Nike staff. By May
2011, 80% of Nike’s footwear supplier shad committed to adopting the new system.

Sustainable innovation takes many forms at NIKE. Today innovation means a

continuous requirement to adapt and learn the surrounding environment. For example, in
2012 nike introduced the first product made using the innovative new NIKE Flyknit
technology and manufacturing process. The Flyknit Lunar 1+ running shoe, launched in
2013, reduces footwear waste in the upper part by 80% on average compared with
traditional production methods. To put a picture to that amount of waste, from its
introduction in 2012 through FY13 the total combined material savings from just the uppers
of the Flyknit Lunar 1+ compared to a traditional running shoe was 66,000kg. Other
opportunities, such as improving working conditions within its global supply chain, are
beyond the reach of any single organization and require collaboration with other supply
chain participants. One way they are working on these changes is through collaboration
with the Fair Labor Association to develop the Sustainable Compliance Initiative. This
initiative, still in development, provides tools to improve the quality, consistency and
efficiency of efforts in the industry to comply with country laws/regulations, and company
standards. The future of lean for NIKE is to deliver profitable growth through sustainable
manufacturing and sourcing. To do this, they are making lean NIKE, Inc.’s manufacturing
standard.

They require a commitment to lean as part of being accepted into their source base
and a minimum commitment and progression for positive ratings by including it in their
Sourcing and Manufacturing Sustainability Index, a component of Manufacturing Index
which assesses factories based on sustainability, cost, quality and on time delivery. They
are working with supply chain to demonstrate the value of lean as a driver of sustained,
improved business performance where workers are engaged and enabled to drive business
success through continuous improvement. Some of the standard metrics used to assess
factory adoption include productivity, human resources management assessments, turnover,
absenteeism, and factory implementation of and results from worker engagement and well-
being surveys.

Nike has 2 overarching goals in their strategy:

1. Make Today Better

2. Design the Future
Design the Future: Nike Lean Manufacturing Nike has determined that their
finished goods manufacturing is where they have the largest impact on people and
the environment.

According to Nike, in order to design the future, Lean Manufacturing must be part
of the solution for them. “Lean manufacturing has been a hallmark of our approach with
factories and is the foundation of how we advance sustainable manufacturing. Lean
manufacturing is a business system and continuous improvement philosophy that aims to
deliver the highest-quality product while eliminating waste, including lost time and
material. At Nike, we also believe lean can empower workers and teams. The success of
the lean approach depends on the implementation of physical changes to production
processes, increased leadership capabilities and the development of an empowered
workforce. Lean manufacturing seeks to engage the minds of those closest to the work to
solve the problems that prevent them from delivering quality product on time, every time.”
 Within that context, they want to be a catalyst for positive change. Consider these
numbers:
• 785 Contract Manufacturers
• Over 1 Million factory workers
• More than 500,000 unique products

To quote, Feng Tay Group, one of the suppliers, produces about 1 out of 5 NIKE
shoes annually. In 2008, carbon emissions from their footwear production accounted for
approximately 18% of the total NIKE’s footwear carbon footprint. In order to reduce this,
NIKE worked closely with their supplier and devised a strategy to reduce carbon emissions
and focus on energy savings. FTG employed a continuous improvement approach, creating
a strategic framework to evaluate and study energy use and carbon emissions in their
factories. From the framework, they test and study potential reduction opportunities, and
then create implementation plans and budgets to support the work. FTG has more than 30
people who work on energy in the factories, and have implemented projects on systems
ranging from boilers to electric motors, lights, and air compressors. Since then, FTG has
achieved an incredible 24% reduction in energy use per pair from 8.46kWhe to 6.41kWhe,
and a 17% reduction in CO2 emissions per pair from 3.46 kgCO2 to 2.86 kgCO2 per pair.
This reduction in energy consumption and CO2 had a ripple effect on NIKE’s product
quality and sustainability.

In another situation, NIKE was so concerned about the significant use of water for
dyeing its apparel. In general, it would use around 12-18 gallons of water per pound of
fabric and demands large amount energy. In such a situation even, an incremental solution
would be very helpful to reduce the amount resource utilized. While working
simultaneously on incremental changes, NIKE acquired a Netherland based startup
DyeCoo Textile systems B.V, which had developed a new technology that could dye
fabrics using no water, remove a significant amount of the energy footprint and eliminate
the need for process chemicals. Having made a small investment in such a technology has
immensely helped NIKE reduce the use of process chemicals and eliminate the use of water.
NIKE is closely working with other Dye houses to replicate the same technology and
incorporate this technology as part of its supply chain. All such measures are certainly
helping NIKE get the competitive advantage and motivating the internal team and its
collaborators to come up with new materials and innovative process designs.

Quality begins at Factory Sourcing – that is, the process a contract manufacturer
has to enter in order to be selected as a Nike manufacturing partner. The sourcing process
is more rigorous than it was and Nike has improved the quality of the manufacturing partner
and the time it takes to select a partner.
 In terms of time it takes to become a partner, it now takes Nike 152 days versus 246
days. That means it takes Nike 38% less time evaluating a manufacturing partner. This is
a massive improvement. In terms of quality, Nike has increased its requirements but
doesn’t leave the partner hanging dry – Nike actually spends time and energy and resources
helping the contract manufacturing partner reach Nike’s new standards. As of this writing,
Nike has 0 manufacturers in Gold, 1 manufacturer in Silver, 535 in Bronze, 156
manufacturers in Yellow, 77 contract manufacturers in Red. As you can see, Nike’s bar of
excellence is high and Nike actively not only audits its manufacturing partners, but also
helps them improve

But at Nike, they go deeper and higher and more broadly. In their words, this is
how training is done in order to help their people – notice the level of Lean Six Sigma
Training conducted.

The curriculum contains 10 modules that each focus on a key area of the Culture of
Empowerment Model. Each module is designed to share HRM best practices related to
lean manufacturing, and contains interactive exercises that allow factory managers to
assess their current state and identify improvement opportunities in areas including
recruiting, selection, employee development, performance management, worker-
management communication and retention.

The curriculum also contains instruction and exercises on lean problem solving and
planning tools including PDCA (plan, do, check, act) and A3 reports, which facilitates
knowledge sharing and collaboration in a concise document. These tools are used
throughout the capacity building to define follow-up projects that factory managers
implement after completing the training.”

[By : Veronica Honoris].

 CHAPTER V

CONCLUSION

In the process we could understand how applying the Lean methodology to HR

practices can make a process robust and sustainable. Nike has applied these principles to
its core and has yielded results. They have not only been able to maintain customer
satisfaction but also satisfaction of their own employees. Safety in a Nike factory today
doesn’t only mean maintaining a hazardless working environment but also reducing
hazards for the nature. Reducing wastes has not only increased production efficiency but
also reduced the effluents making the organization greener in terms of work culture.
Although there is still scope of improvement as lean methodologies implementation is a
never-ending process. We must remember that although adaptation of Six sigma processes
are efficient in reducing defects, reducing defects more than a certain limit won’t be
economically viable.

But lean implementation is not only a process of reducing wastes only by using
better efficiency measures in the process but also methods of making the people realize the
advantages of using better processes. This seldom results are higher economic expenses
and the gains made are far greater, both economically and socially. Innovation is at the root
of the work culture for Nike, so the same must be continued and the innovators must be
counseled regularly to make them aware regarding the environmental and customer
satisfaction parameters being met by their work.

[By : Veronica Honoris].

Working with Lean & Kanban is a journey, and the company can never claim to have
obtained all possible benefits from this method, the process of continuous improvement is
never done. But these three examples show how using Lean & Kanban to move from a
push to a pull work management system can lead to dramatic changes for the better. Each
of these companies improved the working conditions and quality of their products, and did
so without increasing staff hours. And their improvement is ongoing.
Some of the benefits this company has achieved through the use of Kanban are:

• Sales increase
• Reduced waiting time and faster time to market
• Increased first time through rates
• Increase customer trust and trust
• Happier and more productive staff
• Reduction of defects and costs associated with them
• Reduction of production variability
• Up to 100% increase in customer promised meeting times
• Reduction in staff costs
• ROI increases, through a reduction in capital spending
• Reduced payback time
• Health and safety improvement
• Reduction of environmental impact
• Increased innovation
[By : M.Rizki Ullyn Nuha]
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