Capsule Summaries of Key Lean Concepts

Continuous Flow
Producing and moving one item at a time (or a small and consistent batch of items) through a series of processing steps as continuously as possible, with each step making just what is requested by the next step. It is also called one-piece flow, single-piece flow, and make one, move one.

Cycle Time
How often a part or product is completed by a process, as timed by observation. This time includes operating time plus the time required to prepare, load, and unload. The appropriate calculation of cycle time may depend upon context. For example, if a paint process completes a batch of 22 parts every five minutes, the cycle time for the batch is five minutes. However, the cycle time for an individual part is 13.6 seconds (5 minutes x 60 seconds = 300 seconds, divided by 22 parts = 13.6 seconds).

Jidoka
Providing machines and operators the ability to detect when an abnormal condition has occurred and immediately stop work. This enables operations to build-in quality at each process and to separate men and machines for more efficient work. Jidoka is one of the two pillars of the Toyota Production System along with just-in-time. Jidoka is sometimes called autonomation, meaning automation with human intelligence.

Just-in-Time (JIT) Production
A system of production that makes and delivers just what is needed, just when it is needed, and just in the amount needed. JIT and jidoka are the two pillars of the Toyota Production System.

Kaizen
Continuous improvement of an entire value stream or an individual process to create more value with less waste. There are two levels of kaizen: (1) System or flow kaizen focuses on the overall value stream and (2) process kaizen focuses on individual processes.

Kanban
A signaling device that gives authorization and instructions for the production or withdrawal (conveyance) of items in a pull system. The term is Japanese for sign or signboard.

Lean Production
A business system for organizing and managing product development, operations, suppliers, and customer relations that requires less human effort, less space, less capital, and less time to make products with fewer defects to precise customer desires, compared with the previous system of mass production.

Lean production was pioneered by Toyota after World War II and, as of 1990, typically required half the human effort, half the manufacturing space and capital investment for a given amount of capacity, and a fraction of the development and lead time of mass production systems, while making products in wider variety at lower volumes with many fewer defects. The term was coined by John Krafcik, a research assistant at MIT with the International Motor Vehicle Program in the late 1980s.

Lean Thinking
A 5-step thought process proposed by James Womack and Dan Jones in their 1996 book Lean Thinking to guide managers through a lean transformation. The steps are:
1. Specify value from the standpoint of the end customer.
2. Identify all the steps in the value stream.
3. Make the value creating steps flow toward the customer.
4. Let customers pull value from the next upstream activity.
5. Pursue perfection.

Obeya
Obeya in Japanese means simply “big room.” At Toyota it has become a major project management tool, used especially in product development, to enhance effective and timely communication. Similar in concept to traditional “war rooms,” an Obeya will contain highly visual charts and graphs depicting program timing, milestones and progress to date and countermeasures to existing timing or technical problems. Project leaders will have desks in the Obeya as will others at appropriate points in the program timing. The purpose is to ensure project success and shorten the plan-do-check-act cycle.

Pacemaker Process
Any process along a value stream that sets the pace for the entire stream. (The pacemaker process should not be confused with a bottleneck process which necessarily constrains downstream processes due to a lack of capacity.) The pacemaker process is usually near the customer end of the value stream, often the final assembly cell.

Plan, Do, Check, Act (PDCA)
An improvement cycle based on the scientific method of proposing a change in a process, implementing the change, measuring the results, and taking appropriate action. It is also known as the Deming Cycle after W. Edwards Deming who introduced the concept in Japan in the 1950s. The PDCA cycle has four stages:
1. Plan: Determine goals for a process and needed changes to achieve them.
2. Do: Implement the changes.
3. Check: Evaluate the results in terms of performance.
4. Act: Standardize and stabilize the change or begin the cycle again, depending on the results.

Production Lead Time (also Throughput Time and Total Product Cycle Time)
The time required for a product to move all the way through a process from start to finish. At the plant level this is often termed door-to-door time. The concept can also be applied to the time required for a design to progress from start to finish in product development or for a product to proceed from raw materials all the way to the customer.

Takt Time
The available production time divided by customer demand. For example, if a widget factory operates 480 minutes per day and customers demand 240 widgets per day, takt time is two minutes. Similarly, if customers want two new products per month, takt time is two weeks. The purpose of takt time is to precisely match production with demand. It provides the heartbeat of a lean production system.
Takt time was first used as a production management tool in the German aircraft industry in the 1930s. (Takt is German for a precise interval of time such as a musical meter.) It was the interval at which aircraft were moved ahead to the next production station. The concept was widely utilized within Toyota in the 1950s and was in widespread use throughout the Toyota supply base by the late 1960s.
Toyota typically reviews the takt time for a process every month, with a tweaking review every ten days.

Toyota Production System (TPS)
The production system developed by Toyota Motor Corporation to provide best quality, lowest cost, and shortest lead time through the elimination of waste. TPS is comprised of two pillars, just-in-time production and jidoka. TPS is maintained and improved through iterations of standardized work and kaizen, following the scientific method of the plan-do-check-act cycle.

Development of TPS is credited to Taiichi Ohno, Toyota’s chief of production in the post-WWII period. Widespread recognition of TPS as the model production system grew rapidly with the publication in 1990 of The Machine That Changed the World, the result of 5 years of research led by the Massachusetts Institute of Technology. The MIT researchers found that TPS was so much more effective and efficient than traditional, mass production that it represented a completely new paradigm.

Value Stream
All of the actions, both value-creating and nonvalue-creating, required to bring a product from concept to launch and from order to delivery. These include actions to process information from the customer and actions to transform the product on its way to the customer.

Value Stream Mapping (VSM)
A simple diagram of every step involved in the material and information flows needed to bring a product from order to delivery. A current-state map follows a product’s path from order to delivery to determine the current conditions. A future-state map shows the opportunities for improvement identified in the current-state map to achieve a higher level of performance at some future point.

Waste
Any activity that consumes resources but creates no value for the customer.

INCO TERMS

INCOTERMS (International Commercial Terms) were developed by the international chamber of commerece (ICC). they are a uniform set of rules designed for interpretation of international transaction.
The rules were first published in 1936 and have been revised periodically to account for changing modes of transport and document delivery. It has been updated six times. Incoterms 2000 contain13 rules for standardized global trade, defining the most important responsibilities of buyers and sellers in international sales contracts. In order to ensure the new Incoterms 2000 terms are being applied, buyers and sellers should specify Incoterms 2000 on all contracts, thus clearly identifying the source of reference for the definition. Traders using these rules should also clearly specify any and all agreed to variations of the terms. It is not possible for Incoterms to be complete and comprehensive. Variations in local trades, ports and customs are possible. Buyers and sellers must take care when applying the rules to account for these parties, by agreement, to suit any particular contract or circumstance.

Definition of various INCO Terms.

EXW: Ex Works at a named point of origin (e.g., ex factory, ex mill, ex warehouse). Under this term, the price quoted applies only at the point of origin and the seller agrees to place the goods at the disposal of the buyer at the specified place on the date or within the period fixed. All other charges are for the account of the buyer.

FCA: Free Carrier, to a named place. This term replaces the former "FOB named inland port" to designate the seller's responsibility for the cost of loading goods at the named shipping point. It may be used for multimode transport, container stations, and any mode of transport, including air. The seller is responsible for loading goods into the means of transportation; the buyer is responsible for all subsequent expenses. If a port of exportation is named, the costs of transporting the goods to the named port are included in the price.

DEQ: Delivered Ex Quay (Duty Paid), at a named port -- the seller fulfils his obligation when the goods have been made available to the buyer on the wharf at the named port of destination, cleared for importation. The seller has to bear all risks and costs including duties, taxes, and other charges of delivering the goods to the quay. The seller is obligated to obtain the import license, either directly or indirectly. Only used for sea or inland waterway transport.

I do understand that I am exceeding the limit but I think I have put great deal of effort in preparing this table and this table itself is complete in explaining the whole INCOTERMS.

The following chart shows which of the parties is responsible for what functions under the different INCOTERM designations. An (X) indicates that the seller is responsible for that function; a minus sign (-) indicates that the buyer is responsible; (N) indicates that the responsibility is negotiable.

				seller's premises	Carrier premises
		Fees and Costs
			EXW	FCA	FCA	FAS	FOB	CFR	CPT	CIF
	Premises or Named place	Buyers Product Cost	X	X	X	X	X	X	X	X
		International Packaging	X	X	X	X	X	X	X	X
		Certification Fees	X	X	X	X	X	X	X	X
		Inspection Fees	X	X	X	X	X	X	X	X
	Loading Inland	Custom Clearance fees		X	X	X	X	X	X	X
		Loading Fees	-	X	X	X	X	X	X	X
		Cartage Fees	-	X	X	X	X	X	X	X
	Inland handling	Inland Freight	-	-	X	X	X	X	X	X
		Reconsignment Fees	-	-	X	X	X	X	X	X
		Pier Delivery Charges	-	-	X	X	X	X	X	X
	Loading at Vessel	Loading Cost	-	-	-	-	X	X	X	X
		Forwarding Fees	-	-	-	-	X	X	X	X
		Consular Fees	-	-	-	-	X	X	X	X
	Voyage	International Freight	-	-	-	-	-	X	X	X
		Insurance	-	-	-	-	-	-	-	X
										(Port of destination)
		Bank Fees	N	N	N	N	N	N	N	N
		Buyers Bank Fees	X	X	X	X	X	X	X	X
	Unloading at Port	Unloading Fees	-	-	-	-	-	-	-	-
		Import Duty	-	-	-	-	-	-	-	-
		Import Broker	-	-	-	-	-	-	-	-
		Cartage from Pier	-	-	-	-	-	-	-	-
	Inland handling	Inland Freight at Destination	-	-	-	-	-	-	-	-
		Warehousing	-	-	-	-	-	-	-	-
		Documentation
			EXW	FCA	FCA	FAS	FOB	CFR	CPT
		Proforma Invoice	X	X	X	X	X	X	X
		Packing List	X	X	X	X	X	X	X
		Certificate of Origin	X	X	X	X	X	X	X
		Bill of Lading	X	X	X	X	X	X	X
		Commercial Invoice	X	X	X	X	X	X	X
		Export Declaration	N	N	N	N	X	X	X
		Validated Export License	N	N	N	N	X	X	X
		Import License	-	-	-	-	-	-	-
		Who is:
		Exporter of Record?	Buyer	Buyer	Buyer	Seller	Seller	Seller	Seller
		Importer of Record?	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer

-------------------------------------------------------------------------------------------------

	Fees and Costs
		CIF	CIP	DAF	DES	DEQ	DDU	DDP
Premises or Named place	Buyers Product Cost	X	X	X	X	X	X	X
	International Packaging	X	X	X	X	X	X	X
	Certification Fees	X	X	X	X	X	X	X
	Inspection Fees	X	X	X	X	X	X	X
Loading Inland	Custom Clearance fees	X	X	X	X	X	X	X
	Loading Fees	X	X	X	X	X	X	X
	Cartage Fees	X	X	X	X	X	X	X
Inland handling	Inland Freight	X	X	X	X	X	X	X
	Reconsignment Fees	X	X	X	X	X	X	X
	Pier Delivery Charges	X	X	X	X	X	X	X
Loading at Vessel	Loading Cost	X	X	X	X	X	X	X
	Forwarding Fees	X	X	X	X	X	X	X
	Consular Fees	X	X	X	X	X	X	X
Voyage	International Freight	X	X	X	X	X	X	X
	Insurance	X	X	X	X	X	X	X
		(Port of destination)	(Named destination)	(Up to frontier)	(Up to Ex ship, at named port)	(Final Port of destination)
	Bank Fees	N	N	N	N	N	N	N
	Buyers Bank Fees	X	X	X	X	X	X	X
Unloading at Port	Unloading Fees	-	-	-	-	X	X	X
	Import Duty	-	-	-	-	X	X	X
	Import Broker	-	-	-	-	X	-	X
	Cartage from Pier	-	-	-	-	-	-	X
Inland handling	Inland Freight at Destination	-	-	-	-	-	-	X
	Warehousing	-	-	-	-	-	-	X
	Documentation
		CIF	CIP	DAF	DES	DEQ	DDU	DDP
	Proforma Invoice	X	X	X	X	X	X	X
	Packing List	X	X	X	X	X	X	X
	Certificate of Origin	X	X	X	X	X	X	X
	Bill of Lading	X	X	X	X	X	X	X
	Commercial Invoice	X	X	X	X	X	X	X
	Export Declaration	X	X	X	X	X	X	X
	Validated Export License	X	X	X	X	X	X	X
	Import License	-	-	-	-	X	X	X
	Who is:
	Exporter of Record?	Seller	Seller	Seller	Seller	Seller	Seller	Seller
	Importer of Record?	Buyer	Buyer	Buyer	Buyer	Seller	Seller	Seller

-------------------------------------------------------------------------------------------------

		DDU	DDP
Premises or Named place	Buyers Product Cost	X	X
	International Packaging	X	X
	Certification Fees	X	X
	Inspection Fees	X	X
Loading Inland	Custom Clearance fees	X	X
	Loading Fees	X	X
	Cartage Fees	X	X
Inland handling	Inland Freight	X	X
	Reconsignment Fees	X	X
	Pier Delivery Charges	X	X
Loading at Vessel	Loading Cost	X	X
	Forwarding Fees	X	X
	Consular Fees	X	X
Voyage	International Freight	X	X
	Insurance	X	X
	Bank Fees	N	N
	Buyers Bank Fees	X	X
Unloading at Port	Unloading Fees	X	X
	Import Duty	X	X
	Import Broker	-	X
	Cartage from Pier	-	X
Inland handling	Inland Freight at Destination	-	X
	Warehousing	-	X
	Documentation
		DDU	DDP
	Proforma Invoice	X	X
	Packing List	X	X
	Certificate of Origin	X	X
	Bill of Lading	X	X
	Commercial Invoice	X	X
	Export Declaration	X	X
	Validated Export License	X	X
	Import License	X	X
	Who is:
	Exporter of Record?	Seller	Seller
	Importer of Record?	Seller	Seller