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This Lean blog is dedicated to providing useful Lean information that both changes the way you think about continuous improvement, and gives you tools to act on those changes. It is the only blog backed by The Continuous Improvement Companion, our extensive Lean reference guide.

Automated guided vehicles (sometimes called Automatic Guided Vehicles) are driverless vehicles that primarily perform transportation functions. In most cases, they support materials groups in distribution of raw materials and in movement of finished goods. These vehicles may either operate similar to a pallet jack, and carry the load, or as a tow-truck, and pull the load. They are guided by a variety of means, including a buried wire with RF transmissions, magnetic tape, reflectors mounted throughout the facility, or even more sophisticated technologies that sense the environment or track motion. Increasingly advanced technologies are regularly added to AGVs, increasing their usefulness.

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Most processes change over time. A car will age, and as it undergoes normal wear and tear, gas mileage will worsen. It won’t be an overnight change, but it will trend downward. This is drift. Processes, with no visible changes, often slowly perform differently. A fixture may loosen up over time, making it take longer to fasten the product in place. A measuring device may be subjected to a series of small bumps over time the slowly changes its readings, making subsequent tasks take longer.

In some cases, there may be minor alterations to how processes are done over time. For example, a tool might be placed in the wrong location often enough that it inadvertently changes a process, or a vendor might change packaging slightly.

Drift should not be confused with intentional changes to a process that shift an output.

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Production processes require assets to run them. You generally have choices. You can use a big machine that costs a lot of money, but has tremendous functionality and flexibility. These machines, because of their cost, end up being used in several processes or for several products to defray the cost. This tends to disrupt flow.

The alternative is to buy or build a smaller machine that may have fewer functions. This machine is dedicated to a single process. It can then be located in a logical position to support one piece flow without causing problems for other product families. 

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Value added work consists of the tasks that a customer is willing to pay for. Generally this is something that changes the form, fit, or function of raw materials.

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The work sequence is, not surprisingly, the order in which tasks are completed. Work sequence is also commonly referred to as the sequence of operations.

Many tasks follow a logical order. Consider the assembly of a go kart. It makes sense that the tires are installed onto the wheels before the wheels are mounted to the chassis. What is often overlooked, though, is that the order in which the wheels are installed is also important.

A well-designed process will have parts and tools situated at the point of use. It will also create an efficient flow of work. This might mean that other tasks are completed between the installation of each wheel. The wheels might not even all be installed at the same station.

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The break-even point is, not surprisingly, the point (number of units sold) where the company can “break-even” and start earning profit.

When a product or service is sold to a customer, the company incurs both fixed and variable costs. Fixed costs are the same regardless of the number of units sold. Variable costs are dependent on the production rate. Rent for production space, for example, is fixed. It has to be paid whether you build 0 or a million widgets in it. The costs for the components in the widgets, however, are incurred at a direct ratio to the number of units produced.

What that means is that in each time period, before you start earning profit, you have to pay off the fixed costs. The break-even point occurs when selling that last unit has paid all the fixed bills. After that point, the difference between the variable costs and the selling price is all profit.

Break-Even Chart

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The tools, machines, software, or other resources you use to do your job fall into two basic categories. The first type is the most common and contains ‘off the shelf’ resources. The second category includes custom built or highly modified tools, equipment, or even software.

Off the shelf items tend to be cheaper than custom ones with similar functions. As the complexity rises, though, the cost imbalance may flip. The added complexity means you may be paying for features you don’t need.

Off the shelf equipment does have one major advantage. In most cases, it can be obtained much more quickly than specialized equipment can be.

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Delivery is one of the legs of the QDC (quality, cost, delivery) acronym. It is a very simple concept—to get paid, you have to get your product to your customer.

For such a simple concept, delivery plays a large role in a company’s performance. Doing well at delivering quickly can give a company a competitive advantage. Doing poorly can cost a company its customers.

Delivery is both a goal and a byproduct of continuous improvement efforts. Lean, and the transition from batch to flow, can greatly reduce the lead time for a product. Reduction of cycle time further speeds up throughput. This enables a company to promise delivery sooner than they had been doing, and hopefully sooner than their competition.

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Backflushing is an accounting method that can also be used to manage inventory. It is also known as “postproduction issuing.” When an item is purchased by a customer, the appropriate materials and other resources are issued to the order. The inventory levels in the system of all components on the bill of materials are also reduced. When the inventory reaches a prescribed level, an order is placed.

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The Gotta Go Lean Blog focuses on Lean at the front line. We help managers and employees work together to make Lean more productive for the company, and jobs more satisfying for workers.

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