ON-DEMAND LEAN PRODUCTIO
ON-DEMAND LEAN PRODUCTION artile
by Dr. David M. Anderson, P.E., CMC
Copyright © 2022 by David M. Anderson
article on Inventory Reduction
The ability to build mass-customized and standard products
on-demand is the payoff for lean production programs. Lean
Production is taught in the context of build-to-order and mass
customization through Dr. Anderson's in-house seminars
and implemented through his leading-edge consulting.
Lean production1 is a key prerequisite for Build-to-order
and mass customization. The key prerequisites of lean
production are product line rationalization and standardization which
simplify both the supply chain and manufacturing operations. This will make
implementation easier and faster and ensure the success of lean production as
well as build-to-order and mass customization.
There are two types of lean production: replacement
and spontaneous build-to-order. In replacement lean production parts are
common enough to be already built and available to be pulled into assembly from kanban
bins. If not, then parts are made by spontaneous
build-to-Order with common parts made available through kanban and the
non-common parts built on-demand from standard raw materials by CNC machine
tools or manually from on-line instructions.
The most important attribute of lean production is the
ability to build products quickly and efficiently in batch-size-of-one. In
order to do that, all setup must be eliminated including any delays to kit
parts, find and load parts, position workpieces, adjust machine settings, change
equipment programs, and find and understand instructions.
PROBLEMS WITH SETUP
Mass Production deals with setup by accepting it as a
"necessary evil" and then spread it over as many products as possible
in batches or lots to minimize the set-up "charge" per
part. For decades, industrial engineering have used formulas to try to calculate
the "Economic Order Quantity" (EOQ). However, manufacturing in batches
drastically raises costs and lead times because of the following considerations:
C Space. Batched parts occupy much more
space than a single piece flow, especially if batches are so heavy that fork
lift aisles are needed.
C Throughput times. Batching parts
slows throughput because, at each step, the batches wait in line for setup
changes and the processing time of all the parts in the batch.
C WIP inventory. Batches create WIP
inventory; inventory carrying costs are 25% of the value of the parts per
C Defects. Parts made in batches could
be made with recurring defects which may not be determined until after
hundreds of defective parts have been made.
C Disruptions. "Rush jobs"
can cause major disruptions to scheduled production by adding two additional
setups for every affected part. "Treasure hunts" may be needed if
there are any part shortages due to errors in forecasting, bills-of-materials,
or inventory counts. Womack and Jones conclude that treasure hunts "are
the distribution equivalent of the expediting always necessary in
batch-and-queue production operation."2
C Flexibility. Because of all of the
above, batch & queue manufacture is not flexible and therefore does not
support build-to-order and mass customization.
For an summary about the shortcomings of mass production
click here to see the editorial, "End
of the Line for Mass Production; No Time for Batches and Queues."
SETUP & BATCH ELIMINATION 3
If successive products are to be unique and different,
there cannot be any significant setup delays to get parts, change dies
and fixtures, download programs, find instructions, or any kind of manual
measurement, adjusting settings, or positioning of parts or fixtures. For a
plant to mass customize or spontaneously build products to-order, all product
setup must be eliminated, not just the low-hanging fruit or reduce setup as
"much as you can." Definition: "eliminating" setup means
that setup is reduced to the point where it is still feasible to operate
efficiently in a batch-size-of-one mode.
Note that much setup is designed into the product and
Setup & Batch Elimination Steps:
C Distribute parts at all points of use
If part variety is too excessive to allow distribution at all points of
use, then enough parts for a batch must be assembled into a kit
which is put together in the raw materials warehouse, delivered to the
assembly area, and then distributed to part bins or automation machines. This kitting
is a set-up which will inhibit flexibility.
Tools to eliminate kitting are aggressive standardization
and the concurrent engineering of products and processes that minimizes the
number of different parts at any assembly station.
C Tool & tooling setup
Plan A: Eliminate setup. Design the product/processes to
eliminate the need for tooling changes for cutting tools, dies, molds, tool
plates, and fixtures. Tool plates and fixtures can be designed to be versatile
enough to accept a common blank which then can be customized by
computer controlled machine tools or robots, as shown in both illustrations in
the mass customization article.
The blank must quickly be positioned in the fixture without any need for
measuring and manual positioning. Thus the blank must be designed with common
Plan B: make setup changes as quickly as possible. There has been much
progress and much written about rapid die changes.4 Shigeo Shingo
developed the methodology called "Single Minute Exchange of Dies" (SMED)
for Toyota.5 Clever die and mold mounting geometries have been
developed to facilitate quick changeovers.6 Conveyors and
carousels, that were first applied to moving parts and products, are now being
applied to moving dies quickly in and out of presses and molding machines.7
C Consolidate inflexible parts. Parts
needing dies for molding, casting, or stampings should be designed to be
versatile enough to accommodate all products that are supplied by each
C Use of CNC. CNC machine tools are
very versatile tools to eliminate setup since programs can be changed quickly
and electronically. However, physical setup must be eliminated, for example,
workpiece positioning and tool changes. Products may need to be designed for
CNC to completely eliminate setup.
C Maximize the amount of dimensional
variation done with CNC
C Standardize raw workpieces and fixturing
to eliminate setup
C Quick and automatic program change
C Standard cutting tools within tool
C Automatic material feed and eject
C For sheet metal, nesting optimization (can
evolve over time)
C For unusual and low-volume parts, using a
CNC machine to "hog out" parts may lower total cost if it
avoids (a) stocking a high variety of low-volume parts or (b) complications
and delays in the supply chain for low-volume castings or moldings.
C To make the right decisions on flexible
use of CNC, total cost must be used to include machine time, material cost, and
all related overhead costs.
C Manual processing setup. All of the
above setup elimination strategies apply to manual processing. But a setup
that applies uniquely to manual assembly is finding and understanding
instructions. This setup can be eliminated by displaying instruction on
monitors that instantly and clearly show what is to be done at that area to
any product being worked on.
For Parts With Unavoidable Setup:
C Consolidated parts. Inherently
inflexible parts (like castings, moldings, and bare PC boards) may need to be consolidated
into very versatile standard parts which can be ordered as a steady flow with
confidence that, because of their versatile, they will be used one way or
C Arrange kanban resupply. Parts
that qualify for kanban resupply can be made in
batches if the combination of setup time, run time, and delivery time is short
THE LEAN SUPPLY CHAIN
The typical response when suppliers are asked to deliver
parts just-in-time to their customers’ pull signals is to keep building the
parts in large batches, try to stock enough in their finished goods inventory,
and meter them out "just in time." However, this is not really
just-in-time and it is certainly not conducive to spontaneous BTO. Parts
availability would depend on the assemblers’ forecasts, which are becoming
increasingly less accurate, and the supplier’s inventory, which is costly to
carry, especially as obsolescence risks increase. There are four basic
techniques that contribute to a spontaneous supply chain:
(a) Kanban resupply. As mentioned in the third point above, parts that
qualify for kanban resupply, and the related techniques
of min/max and breadtruck, can be made in
batches as long as the response time and bin (or delivery) size is adequate.
Even though parts are made in batches, this still qualifies for a spontaneous
supply technique because the batch (a bin’s worth of parts) is made upon the
pull signal that the current bin has emptied. Of course, the parts manufacturers
may have to implement setup reduction to make small batch production economical.
Thus, kanban resupply avoids the hazards of forecasting, the cost and delays of
purchasing, and the cost and risk of inventory. The resupply is automatic once
the pull signal gets to the supplier.
(b) Spontaneous build-to-order of parts. For parts that do not qualify
for kanban, suppliers themselves would need to implement spontaneous BTO so that
they could actually build on-demand to their customers’ pull signals.
This is the only way to supply mass-customized parts on-demand, which may be
needed for mass-customized products. Spontaneous BTO of parts may require (1)
the development of vendor-partner relationships for suppliers to establish the
ability to build parts in any quantity on-demand and (2) versatile information
systems to process and distribute the necessary information.
(c) In-house part fabrication. In order for spontaneous BTO to work, all
parts and materials must be available on-demand. If there are any key parts that
are not suitable for kanban and no supplier can build them to your pull signal,
then you might have to bring those operations in-house. Companies that have
outsourced certain operations in the interest of focusing on functional
"core competencies" may have to reevaluate their strategies.
Unfortunately, most outsourcing is a batch operation which does not lend itself
to spontaneous BTO.
If the new core competency is to be spontaneous BTO or
mass customization, then the manufacturer will need a complete supply chain that
can build products and all their parts on-demand. This may require the selective
"reintegration" of certain key steps.8 One of the author’s
clients, Badger Meter, of Milwaukee, Wisconsin, found
it was able to build a wide variety of water meters flexibly except the printing
of the face plates, which had to cope with several ways of measuring water flow
plus the logo of every customer (utility). So they learned how to print face
plates in small quantities to complete the picture.
(d) Strategic stockpiles. Strategic stocks may be necessary until one
of the above three techniques can be applied. As far as overall inventory
strategy is concerned, this could be considered temporarily moving one
step backwards after moving twenty steps forward. Hopefully these parts are
standardized and consolidated so that there would be few to stock and each would
have a good chance of being used one way or another.
FLOW MANUFACTURING and ONE-PIECE FLOW
If setup can be eliminated or reduced enough to eliminate
the need to manufacture in batches, then parts, sub-assemblies, and products can
flow one piece at a time. One-piece flow may be essential when building to-order
a wide variety of standard or mass-customized products.
It also eliminates much of the waste of batch-and-queue
manufacturing: waiting, interruptions, overproduction, extra handling, recurring
defects, and other non-value-added activities.
One-piece flow has a distinct advantage for assuring
quality at the source. First, flow manufacturing eliminates the possibility that
recurring defects may be built into several batches before being caught at a
downstream inspection step. Second, people working in flow manufacturing look
for any visible deviation as each part is handed to "its customer"
(the next station). Further, if the part doesn’t fit or work in the next
operation, the feedback will be immediate leading to quick rectification of the
In flow manufacturing, parts may be manually handed to the
next station, which may be very close, thus eliminating the need for mechanized
conveyance or fork lifts, whose aisles may occupy as much space as the
One-piece lines are usually sequential, sometimes breaking
into parallel routes when needed to balance the line (see next section). Rather
then laying out "lines" in a literal straight line, it may be
advantageous create a U-shaped line which bends the line into the shape
of a "U" for the following reasons:
C Visual control. Everyone in the line
can see the whole operation, enhancing visual control, thus resulting
in greater group ownership, continuous improvement (kaizen), and problem
solving. Visual control can be further enhanced with clearly visible andon
(warning or status) lights and display boards.
C Problems heard. When everyone in the
line works close together, problems at all stations will be heard by the
entire line, thus leading to faster problem identification and resolution.
C Helping out. If one worker gets
behind, nearby workers can help out, even from end to beginning.
C Skipping steps. Having work stations
closer together makes it easier to process orders that skip steps.
In sequential one-piece flow, when one production machine
breaks down, the whole line will go down. Therefore proactive equipment
maintenance is important to prevent unexpected production interruptions. A good
TPM program should assure this. Inventory buffers may give an allusion of
protection, but may still require special measures, like overtime, to recover.
Equipment maintenance can be more responsive and less
costly with standardization of all replaceable parts: belts, motors, fuses,
Ideally, to achieve optimal machine tool and work station
utilization, one-piece flow lines should be balanced so that the time to do the
required tasks at each station, called the takt time, is fairly constant.
C If takt time at each station = station
capacity, arrange into sequential line.
C If takt time does not equal station
capacities, but does not vary with products:
C Upgrade appropriate capacities or find
faster machines to achieve balance.
C Group machines/stations into
series/parallel paths to achieve better balance, perhaps 3 of one feeding 2
C If underutilized machines are not
expensive, don’t worry about balancing if the entire system can provide
C If takt time varies with different products,
C Make stations/machines flexible enough to
C Sequence jobs to compensate for imbalances
C Size the line based on the most expensive
machine and provide excess capacity for the less expensive machines.
Another way to balance lines is to make certain stations
become kanban sources, so that they make kanban parts during times when they
have excess capacity.
Flexible operations work best with dedicated cells or
lines for every product family. Cells can be permanently configured so that
within a product family, all setup has been eliminated. This strategy work best
with many simpler dedicated machines instead of a single "mega-machine,
unless the mega-machine can handle a very large family -- enough to justify its
expense. In some cases older or "obsolete" machines may be used to
provide complete set of machines for the cell; this was one of the solutions
covered in Eli Goldratt’s The Goal.9 Remember that speed or
capacity may not be as important as flexibility.
Total cost analysis must be used taking into account all
related overhead costs in addition to the usual material and processing cost. In
some cases, cells may be installed even if the cell alone can not be justified
by traditional analyses, but if the cell completes a valuable plant capability
like build-to-order. The guiding strategy for cell design is flexibility and
Artificially induced irregularities.
Raw material comes out of the ground in a steady flow.
Most products are ultimately consumed in a steady flow. Most irregularities in
factory workload are artificially induced.10 Sources of irregular
factory workload include:
C Production quotas for end of the
month, quarter, and year.
C Promotions, usually to move built but
unsold finished goods or to meet sales quotas. This situation is compounded
when customers hold off purchases until the expected "sales."
C Quantity discount and "deal
making" encourage large batch purchases. Ironically, this may cause
the producer to work overtime to deliver the large batches and cause the
customer to incur inventory carrying costs once the batch is received.
C Lack of dealer confidence of product
availability, leading suppliers to build up inventory.
C Lack of customer confidence in product
availability, leading consumers to "stock up" when they can.
C The "business cycle." Half
of the effects of downturns are caused by working off excess inventories; half
the upturns are caused by building up inventories for anticipated upswings in
Seasonal irregularities. Some irregularities in factory workload are
seasonal, such as Christmas, back-to-school, and other events. But these can
be dealt with, since these are predictable. Notice how grocery stores know how
many turkey’s to order for the holidays and how much beer and snack foods to
order for major sporting events.
Line capacity issues:
C Eliminated artificially induced irregularities
C If demand exceeds daily capacity for a line, prioritize
scheduling into categories (next-day, two-day, time available within the week)
and charge accordingly, either a premium for next day or a discount for slower
C For short-range peak demand beyond capacity of
a line or cell:
C Shift production to another line if
second line is flexible enough
C Consider overtime
C For long-range peak demands beyond capacity, expand
capacity and/or outsource the least efficient or least
compatible operation. Pre-assign efficiency ratings & work from the top of
C Avoid unexpected loss of capacity with preventive
maintenance (TPM) and quality assurance programs, like TQM and
process controls, to avoid interruptions and products looping back.
DEVELOPING PRODUCTS FOR LEAN MANUFACTURE 12
Problems Going Lean with "Un-lean" Product Designs
C There may be too many different products
and, thus, too many different parts to distribute at all the points of use.
C Even within the ideal group of products,
there may be a needless and crippling proliferation of parts and materials.
C Specified parts may be hard to get quickly.
C The product/process may have too many setups
C Quality may not be designed into the
product/process which results in disruptions when failures loop back for
C Product/process design may not make optimal
use of CNC. Most CNC equipment is used in a batch mode, not flexibly.
Concurrent Engineering of Product Families and Flexible Processes
To be successful at designing products for a lean environment, product
development teams must:
C Proactively plan product portfolios for
compatibility with lean operations
C Design products in synergistic product
C Design around aggressively standardized
parts and raw materials
C Make sure specified parts are quickly
C Consolidate inflexible parts into very
versatile standardized parts
C Assure quality by design and by concurrently
designed process controls
C Concurrently engineer product
families and flexible processes.13
C proactively specify all processes; not doing
so gets the defaults, which may not be lean
C design overall process flow
C design the process and the tools at each
workstation, ensuring no setup
C Make all decisions based on total cost.
Designing to Eliminate Setup
C Design around common cutting tools, bending
mandrels, punches, etc. Keep tool variety within tool changing capability for the
entire product family.
C Design versatile fixtures at each workstation
that eliminate setup to locate parts or change fixtures.
C Develop flexible assembly with on-line
C Make sure part count does not exceed available
tool capacity or space at each work station.
Designing for CNC
Maximize use of available programmable fabrication and assembly tools, without
expensive setup delays. Programmable CNC tools include CNC machining, spot
welding, robotic painting, printed circuit board assembly, and sheet metal
laser cutting, bending, and punching.
RESULTS OF SETUP ELIMINATION AND BATCH-SIZE-OF-ONE FLOW
Setup eliminated ž batch-size-of-one
flexibility ž one piece flow ž
Eliminating Setup Itself Can:
C Decrease throughput time to approach the
"labor standard" (actual minutes actually spent to fabricate and
assemble a product).
C Eliminate setup delays on expensive
equipment and thus improve machine tool utilization
C Save setup labor costs
C Eliminate inspection time and scrap costs
verifying the first parts made after setup
In addition, Batch-Size-Of-One Flexibility Can:
C Allow build-to-order and mass customization
C Allow dock-to-stock part delivery
(see discussion later), thus eliminating:
C Inventory carrying costs of raw parts
inventory (floor space, administration, etc.)
C The cost and delays of incoming inspection
and logging in parts
C Eliminate the penalties of kitting:
C Labor cost to kit
C Floor space for kitting area
C Production delays and expediting costs
when kits are short
C Waste or restocking costs when kits are
In addition, one-piece flow can:
C Improve quality with rapid feedback to catch
and rectify quality problems fast. Large batches of parts can all be made with
the same defect so that many parts will have to be scrapped or reworked.
C Eliminate fork lifts including the labor,
equipment, and floor space for the aisles
C Foster psychological flow,14
improve job satisfaction, relieve boredom, and encourage continuous
In addition, eliminating WIP inventory can:
C Eliminate WIP inventory carrying cost = 25%
of value of inventory per year
C Cut floor space needs in half.15, 16,
17 This is especially important in times of growth, but floor space
savings should always be assigned a value to encourage more efficient
utilization of space.
The very first step may be to start with a few hours of the
DFM thought-leader to help formulate strategies and implementation planning.
See his consulting page: http://design4manufacturability.com/Consulting.htm
To start an email discussion On-Demand Lean Production, send phone
or email below:
Dr. Anderson is a California-based
consultant specializing in training and consulting on build-to-order, mass
customization, lean/flow production, design for manufacturability, and cost
reduction. He is the author of "Build-to-Order
& Mass Customization, The Ultimate Supply Chain Management and Lean
Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or
Inventory" (2008, 512 pages; CIM Press, 1-805-924-0200,
www.build-to-order-consulting.com/books.htm) and "Design
for Manufacturability & Concurrent Engineering; How to Design for
Low Cost, Design in High Quality, Design for Lean Manufacture, and Design
Quickly for Fast Production" (2008, 448 pages; CIM Press,
1-805-924-0200; www.design4manufacturability.com/books.htm). He can be
reached at (805) 924-0100 or firstname.lastname@example.org;
1. An excellent reference on lean production is: Lean Thinking; Banish
Waste and Create Wealth in Your Corporation, by James P. Womack and Daniel
T. Jones (Simon & Schuster, 1996).
2. ibid., p. 83.
3. Much of this is drawn from the book "Build-to-Order & Mass Customization, the
Ultimate Supply Chain and Lean Manufacturing Strategy for Low-Cost On-Demand
Production without Forecasts or Inventory," (2004, 520 pages, CIM
Chapter 8, "On-Demand Lean Production."
4. Robert W. Hall, Zero Inventories, (Homewood, IL, Business One
Irwin, 1983), Chapter 5.
5. Shigeo Shingo, A Revolution in Manufacturing, The SMED System,
(Portland, OR, Productivity Press, 1985).
6. Kiyoshi Suzaki, The New Manufacturing Challenge, Techniques for
Continuous Improvement, (New York, Free Press, 1987), Chapter 3.
7. Kiyoshi Suzaki, The New Manufacturing Challenge; Techniques for
Continuous Improvement, Video program (Dearborn, MI, Society of
8. Adrian J. Slywotzky and David J. Morrison, Profit Patterns, 30 Way to
Profit from Strategic Forces Reshaping Your Business, (Times Business,
Random House, 1999), "Reintegration," p. 117-123.
9. Eliyahu M. Goldratt, The Goal, (North River Press, Second Revised
10. James P. Womack and Daniel T. Jones, Lean Thinking; Banish Waste and
Create Wealth in Your Corporation, (1996, Simon & Schuster), p. 87,
"Is Chaos Real?"
11. Ibid. p. 88, "Do we really need a business cycle."
12. Much of this is drawn from the "Build-to-Order & Mass Customization, the
Ultimate Supply Chain and Lean Manufacturing Strategy for Low-Cost On-Demand
Production without Forecasts or Inventory," (2008, 512 pages, CIM
10, "Product Development for Build-to-Order & Mass Customization."
13. For a general summary on agile product development, see the book
Agile Product Development for Mass Customization, by David M. Anderson
(McGraw-Hill, 1997); Chapter 9, "Agile Product Development for Mass
14. Mihaly Csikzentmihalyi, Flow: The Psychology of Optimal Experience
(New York: Harper Perennial, 1990).
15. Jones, Daniel J., "JIT & the EOQ Model: Odd Couples No
More!," Management Accounting v72, n8 (Feb 1991), pp. 54 - 57.
16. Richard J. Schonberger, World Class Manufacturing, The Lessons of
Simplicity Applied, (New York, Free Press, 1986), p. 83.
17. ibid., pp. 229-236.
[Mass Customization and Build-to-Order
home page] [Article Directory]
& Mass Customization Consulting] [BTO
& Mass Customization Seminars] [BTO
& Mass Customization Books]