ACKNOWLEDGEMENTS
In this opportunity, I give my special thanks to Assoc. Prof. Dr. Do Thi Dong who
always took time out to hear and guide me how to do my Bachelor thesis.
Furthermore, I send my thanks to other lecturers in National Economics University
who help me complete all procedures of my thesis.
Without the support and co-operation of the Board of Directors, managers, and my
coworkers at Nam An Company, I cannot finish successfully this thesis about
“Application of Lean Manufacturing at Nam An Mechanism and Environment Joint
Stock Company”. And especially, I send my deepest thanks to Mrs. Vu Hoang
Nguyet, the Senior Financial Manager at the company, for giving useful decision &
necessary advices
Moreover, I am eternally grateful my friend, Mr. Tran Thanh Long, who always
encourages me and helps me in information technology. In addition, I would like to
thank to all of my friends who help me in completion of this thesis with their kind
encouragement.
An obligatory thanks is spent for my classmate in National Economics University
who share their knowledge with me, help me and encourage me all time I study in
the university.
Finally, I am highly indebted my family who are always in my side and give me the
most honest advices.
Sincerely,
Nguyen Thu Phuong
Hanoi, May 2017

i


TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................................................................................ii
LIST OF TABLES AND FIGURES...............................................................................................................vi
EXECUTIVE SUMMARY...........................................................................................................................x

INTRODUCTION......................................................................................................................................1
CHAPTER 1..............................................................................................................................................1
CONCEPTUAL FRAMEWORK OF LEAN MANUFACTURING....................................................................2
1.1. Definitions of Lean Manufacturing.............................................................................................2
1.4. Application of Lean Manufacturing..........................................................................................10
CHAPTER 2............................................................................................................................................12
COMPANY PROFILE AND METHODOLOGY..........................................................................................12
2.1. Nam An Mechanism and Environment Joint Stock Company’s profile...................................12
2.1.1. Overview of the company.................................................................................................12
2.1.2. Organizational structure....................................................................................................14
2.1.3. Manufacturing process......................................................................................................16
2.1.4. Financial results.................................................................................................................17
2.2. Methodology.............................................................................................................................21
2.2.1. Research framework..........................................................................................................21
2.2.2. Research design and approach..........................................................................................22
2.2.3. Data collection and processing.........................................................................................23
CHAPTER 3............................................................................................................................................25
WASTES AT NAM AN MECHANISM AND ENVIRONMENT JOINT STOCK COMPANY: FINDINGS AND
DISCUSSION..........................................................................................................................................25
3.1. Characteristics of the sample...................................................................................................25
3.2. Findings.....................................................................................................................................27
CHAPTER 4............................................................................................................................................36
CONCLUSION AND RECOMMENDATIONS...........................................................................................36
4.1. Conclusion.................................................................................................................................36
4.2. Recommendations....................................................................................................................37
REFERENCES.........................................................................................................................................39
APPENDICES.........................................................................................................................................40
ii



iii


STATUTORY DECLARATION
I herewith formally declare that I myself have written the submitted Bachelor’s
Thesis independently. I ensure that the thesis did not plagiarize any outside
documents except for the quoted literature and other sources mentioned at the end
of this paper.
I clearly marked and separately listed all the literature and all other sources which I
employed producing this academic work, either literally or in content.
Hanoi, May 10th 2017

Nguyen Thu Phuong

iv


ABBREVIATIONS
ABBREVIATION

EXPLANATION

CEO

Chief Executive Officer

Dr

Doctor


EBIT

Earnings Before Interest and Tax

ERP

Enterprise Resources Planning

JIT

Just In Time model

JSC

Joint Stock Company

HR Department

Human Resources Department

KPI

Key Performance Indicator

LLC/Ltd

Limited Liability Company

MRPII


Manufacturing Resources Planning II

Nam An M&E JSC Nam An Mechanism and Environment Joint Stock Company
Nam An HN

Nam An Hanoi

Nam An BN

Nam An Bac Ninh

Nam An HD

Nam An Hai Duong

TPS

Toyota Production Systems

TPM

Total Productive Maintenance

TQM

Total Quality Management

ROA

Return on Assets


ROE

Return on Equity

SMED

Single Minute Exchange of Die

VND

Vietnam Dong

v


LIST OF TABLES AND FIGURES
TABLE OF CONTENTS..............................................................................................................................ii
LIST OF TABLES AND FIGURES...............................................................................................................vi
EXECUTIVE SUMMARY...........................................................................................................................x
INTRODUCTION......................................................................................................................................1
CHAPTER 1..............................................................................................................................................1
CONCEPTUAL FRAMEWORK OF LEAN MANUFACTURING....................................................................2
1.1. Definitions of Lean Manufacturing.............................................................................................2

Figure 1.1: Five principles of Lean..................................................................3
Figure 1.2: Toyota Production System house...................................................8
1.4. Application of Lean Manufacturing..........................................................................................10

Figure 1.3: Application of Lean Manufacturing.............................................10

CHAPTER 2............................................................................................................................................12
COMPANY PROFILE AND METHODOLOGY..........................................................................................12
2.1. Nam An Mechanism and Environment Joint Stock Company’s profile...................................12
2.1.1. Overview of the company.................................................................................................12

Figure 2.1: Milestones of Nam An company.................................................12
2.1.2. Organizational structure....................................................................................................14

Figure 2.2: System structure of Nam An company........................................14
2.1.3. Manufacturing process......................................................................................................16

Figure 2.4: Production process of a gas chamber...........................................16
2.1.4. Financial results.................................................................................................................17

Figure 2.5: Nam An M&E JSC, Net Sales in period 2012 - 2016..................19
2.2. Methodology.............................................................................................................................21
2.2.1. Research framework..........................................................................................................21
2.2.2. Research design and approach..........................................................................................22
2.2.3. Data collection and processing.........................................................................................23
CHAPTER 3............................................................................................................................................25
WASTES AT NAM AN MECHANISM AND ENVIRONMENT JOINT STOCK COMPANY: FINDINGS AND
DISCUSSION..........................................................................................................................................25
3.1. Characteristics of the sample...................................................................................................25
Table 3.1: Characteristics of the sample..................................................................................25
vi


Figure 3.1: Sample’s specialization pie chart.................................................26
Figure 3.2: Experience time of the sample.....................................................26
3.2. Findings.....................................................................................................................................27


Figure 3.3: Results of the survey...................................................................27
Figure 3.4: The Nam An M&E JSC, Overall average score of 8 types of
wastes............................................................................................................28
Figure 3.5: The Nam An M&E JSC, The result of the survey........................30
Figure 3.6: Nam An M&E JSC, the result of Overproduction.......................31
Figure 3.7: Nam An M&E JSC, the result of Queues....................................32
Figure 3.8: Nam An M&E JSC, The result of Transportation........................32
Figure 3.9: Nam An M&E JSC, The result of Over-processing.....................33
Figure 3.10: Nam An M&E JSC, The result of Inventory..............................33
Figure 3.11: Nam An M&E JSC, The result of Motion.................................34
Figure 3.12: Nam An M&E JSC, The result of Defective product.................34
Figure 3.13: Nam An M&E JSC, The result of Human.................................35
CHAPTER 4............................................................................................................................................36
CONCLUSION AND RECOMMENDATIONS...........................................................................................36
4.1. Conclusion.................................................................................................................................36
4.2. Recommendations....................................................................................................................37
REFERENCES.........................................................................................................................................39
APPENDICES.........................................................................................................................................40
TABLE OF CONTENTS..............................................................................................................................ii
LIST OF TABLES AND FIGURES...............................................................................................................vi
EXECUTIVE SUMMARY...........................................................................................................................x
INTRODUCTION......................................................................................................................................1
CHAPTER 1..............................................................................................................................................1
CONCEPTUAL FRAMEWORK OF LEAN MANUFACTURING....................................................................2
1.1. Definitions of Lean Manufacturing.............................................................................................2

Figure 1.1: Five principles of Lean..................................................................3
Figure 1.2: Toyota Production System house...................................................8
1.4. Application of Lean Manufacturing..........................................................................................10


Figure 1.3: Application of Lean Manufacturing.............................................10
CHAPTER 2............................................................................................................................................12
vii


COMPANY PROFILE AND METHODOLOGY..........................................................................................12
2.1. Nam An Mechanism and Environment Joint Stock Company’s profile...................................12
2.1.1. Overview of the company.................................................................................................12

Figure 2.1: Milestones of Nam An company.................................................12
2.1.2. Organizational structure....................................................................................................14

Figure 2.2: System structure of Nam An company........................................14
2.1.3. Manufacturing process......................................................................................................16

Figure 2.4: Production process of a gas chamber...........................................16
2.1.4. Financial results.................................................................................................................17

Figure 2.5: Nam An M&E JSC, Net Sales in period 2012 - 2016..................19
2.2. Methodology.............................................................................................................................21
2.2.1. Research framework..........................................................................................................21
2.2.2. Research design and approach..........................................................................................22
2.2.3. Data collection and processing.........................................................................................23
CHAPTER 3............................................................................................................................................25
WASTES AT NAM AN MECHANISM AND ENVIRONMENT JOINT STOCK COMPANY: FINDINGS AND
DISCUSSION..........................................................................................................................................25
3.1. Characteristics of the sample...................................................................................................25

Figure 3.1: Sample’s specialization pie chart.................................................26

Figure 3.2: Experience time of the sample.....................................................26
3.2. Findings.....................................................................................................................................27

Figure 3.3: Results of the survey...................................................................27
Figure 3.4: The Nam An M&E JSC, Overall average score of 8 types of
wastes............................................................................................................28
Figure 3.5: The Nam An M&E JSC, The result of the survey........................30
Figure 3.6: Nam An M&E JSC, the result of Overproduction.......................31
Figure 3.7: Nam An M&E JSC, the result of Queues....................................32
Figure 3.8: Nam An M&E JSC, The result of Transportation........................32
Figure 3.9: Nam An M&E JSC, The result of Over-processing.....................33
Figure 3.10: Nam An M&E JSC, The result of Inventory..............................33
Figure 3.11: Nam An M&E JSC, The result of Motion.................................34
Figure 3.12: Nam An M&E JSC, The result of Defective product.................34
Figure 3.13: Nam An M&E JSC, The result of Human.................................35
viii


CHAPTER 4............................................................................................................................................36
CONCLUSION AND RECOMMENDATIONS...........................................................................................36
4.1. Conclusion.................................................................................................................................36
4.2. Recommendations....................................................................................................................37
REFERENCES.........................................................................................................................................39
APPENDICES.........................................................................................................................................40

ix


EXECUTIVE SUMMARY
Lean Manufacturing philosophy was applied in academic literature in 1988 and

popularized by the book ‘The machine that change the world’(Womack et al.,
1990). Later on, the Lean implementation technology (Lean) has its root in
manufacturing and especially the automotive sector through Toyota Production
Systems. Lean Manufacturing theory has been used widely in a lot of
manufacturing companies in all over the world for decades, especially in Japan.
However, Lean Manufacturing is a new concept in Vietnam and it has been
implemented for over 20 years. Lean theory includes a number of issues such as 5
principles (Identify customers and what they value, Map the value stream, Create
Flow to the customers, Establish pull based on customer demand and Seek
Continuous improvement), 4 Objectives (Improve quality, Eliminate wastes, Reduce
time, and Reduce total costs), 8 types of wastes (Overproduction, Queues,
Transportation, Over-processing, Inventory, Motion, Defective product, and
Human) and a number of tools established by Toyota Production Systems. The Lean
Manufacturing approach refers to transform non-value added activity into value
added activity. Lean Manufacturing technology has its impetus and focus on whole
operation. Lean Manufacturing methods are inclusive of all employees and involve
a major change in the embedded attitudes of the individuals that make up the
organizations.
Nam An Mechanism and Environment Joint Stock Company is a company producing
heavy industrial products which was founded in 2000. In fact, Nam An company is a small
scale business with a number of problem during operations management such as inventory
management, standardized process, human resources management. In order to make Nam
An company can develop in the high competitive market, the company need to apply Lean
Thinking to eliminate wastes. The reason why the wastes should be controlled is these
wastes are the biggest problem creating higher cost for the company.
In this study, both secondary and primary data was used. Secondary data can be
collected from books, newspapers, articles and several business reviews. Besides
that, to make arguments in the thesis more clear, Financial statements, Inventory
reports and Transportation reports of Nam An M&E JSC were used. About primary
data, a questionnaire about the company operations situation was conducted by the

author. The survey uses Likert scale with 5-point to assess the questionnaire. There
are 22 questions in the questionnaire which includes 21 multiple choice questions
x


and an open question. Based on Lean theory about elimination of wastes, these
multiple choice questions were divided into 8 types of wastes. Normally each part
has 3 questions, however, Overproduction, Motion and Defective product parts have
less than 3 questions and Human part includes 4 questions.
The questionnaire was proposed as a form of personal interview with 13 respondents.
Besides 22 questions in the questionnaire, personal interview could reveal many other
points out of issue mentioned in the questionnaire. This is a semi structured interview
because the interview was based on fix questions in the questionnaire. However,
interviewer may ask some more questions to explore detail information.
After doing the survey, several wastes existing in the company would be pointed out.
Based on the Likert scale point, the higher score wastes should be focused on in shorttime period. The thesis only analyzes based on the score of questionnaire’s result.
The survey’s results reveal that Overall average score of the questionnaire is 2.22
per 5 point which means that there are not too many wastes existing in the company.
Meanwhile, 4 types of wastes which point is over average score are Overproduction,
Transportation, Human and Queues. Moreover, the highest score belongs to
Overproduction part with 3.46 per 5.The results of the questionnaire show that there are
too many wastes in the company and they need to be eliminated as soon as possible. These
types of wastes should be controlled by the company no more than 3 years because these
wastes in long term will affect to the benefit of Nam An company.
Meanwhile, 4 other types of wastes are Inventory, Defective product, Motion and
Over-processing which do not exist too many in the company with the right score
order are 2, 2, 1.73 and 1.46. For these wastes, Nam An company should maintain
and improve in the long period.
Based on the result of the questionnaire and several tools mentioned in the
Conceptual Framework, the study proposes several recommendations to apply Lean

for the company such as build Pull system, Just-in-time model and Value stream
mapping. Furthermore, the company can build an exactly KPI and feedback
channels for their employees.
The thesis is about application of Lean Manufacturing at Nam An M&E JSC.
However, there are several limitation of the thesis that have not resolved. At first,
the sample of the thesis is small (only 13), however, it is the total number of
respondents can be interviewed for this thesis. Secondly, there are many issues
according to Lean manufacturing theory, however, this study only mentioned about
elimination of wastes. And finally, the range of conceptual framework is broad, the
xi


research cannot review all literature of Lean manufacturing.

xii


INTRODUCTION
Lean Manufacturing philosophy has been used popular in a number of producing
companies in all over the world for decades, especially in Japan. However, Lean
Manufacturing is a new concept in Vietnam and it has been implemented for over 20
years. In today's highly competitive world, a number of organizations in Vietnam are
striving hard to stay competitive and profitable for a long-term period. They have a
golden opportunity to downsize their cost, customer lead-time and cycle time through
the application of Lean Manufacturing technologies. Some of the hurdles that the
country faces, on the other hand, include the lack of scale, and the low investment
being made in technology and infrastructure. To safeguard the interest of these
manufactures in the long run in the Vietnamese economy, the manufacturers need to be
competitive simultaneously maintaining the quality standards which could be possible
with implementing lean techniques in their system.

Nam An Mechanism and Environment Joint Stock Company experienced 16-year
operating and producing. Nam An M&E JSC is a manufacturer in heavy industry. The
company focuses on petroleum systems, boiler, compressor, etc. However, Nam An
company only a small scale company so there are a number of problem existing in the
company such as operations management, logistics management, human resources
management and producing process. In order to make Nam An company can develop in
the high competitive market, the company need to apply Lean Thinking to eliminate
wastes. The reason why this thesis mentioned about elimination wastes according to
Lean Manufacturing is Lean theory will help the company solve all above problems.
Rationale of Study
The purpose of this study is to find several wastes and propose solutions according
to Lean Manufacturing to eliminate these wastes at Nam Am Mechanism and
Environment Joint Stock Company.
Objectives of the study
i. To review Lean Manufacturing philosophy and its application
ii. To identify wastes at Nam An M&E JSC
ii. To propose several recommendations in order to improve company’s performance
Structure of the study
Chapter 1: Conceptual framework of Lean Manufacturing
Chapter 2: Company profile and Methodology
Chapter 3: Wastes at Nam An M&E JSC: Findings and Discussion
Chapter 4: Conclusion and Recommendations

CHAPTER 1
1


CONCEPTUAL FRAMEWORK OF LEAN
MANUFACTURING
1.1. Definitions of Lean Manufacturing

The process of Lean Manufacturing has been the main concerns and issues of many
manufacturing companies throughout the world. Many processes leading up to lean
manufacturing have influenced this greatly such as Interchangeable parts, Just in
Time Production, the Ford Assembly line, and the Toyota Production Systems.
This specific process of Lean Production has been implemented and spread out by
all types of leading manufacturing companies. Lean means "manufacturing without
waste." Waste ("muda" in Japanese) has many forms. Material, time, idle
equipment, and inventory are examples. Most companies waste 70%-90% of their
available resources. Even the best Lean Manufacturers probably waste 30%
(Strategosinc, 2008). 'LEAN' has always been important to manufacturers. When
you reduce inventories, assets, overhead, wait times and out-of-specs, you generally
increase profits. Simply put, lean manufacturing is a key contributor to high
performance - the ability to consistently outpace competitors across economic
cycles, industry cycles and generations of leadership (Russell, 2006). Overall, “this
process improves the manufacturing time, reduces costs and the reduction of wastes
and defects.”
The popular definition of Lean which is supposed in Lean Manufacturing and the Toyota
Production System (SAE) usually consists of the following: “It is a comprehensive set of
techniques that, when combined and matured, will allow you to reduce and then
eliminate the seven wastes.” This system not only will make your company leaner, but
subsequently more flexible and more responsive by reducing waste.
According to Fundamental of Lean (Deborah Nightingale, 2005), “Lean is a process
of eliminating wastes with the goal of creating value for enterprise stakeholders.”
Meanwhile, there is a more simple definition of Lean in www.Lean.org “which is
creating more values for customers with fewer resources.” A lean organization
understands customer value and focuses its key processes to continuously increase
it. The ultimate goal is to provide perfect value to the customer through a perfect
value creation process that has zero waste.
Eliminating waste along entire value streams, instead of at isolated points, creates
2



processes that need less human effort, less space, less capital, and less time to make
products and services at far less costs and with much fewer defects, compared with
traditional business systems. Companies are able to respond to changing customer
desires with high variety, high quality, low cost, and with very fast throughput
times. Also, information management becomes much simpler and more accurate.
In conclusion, the most comprehensive and popular definition of Lean
Manufacturing is supposed by Lean.org: “Lean is a process which is create more
values for customers with fewer resources.”
1.2. Principles and Objectives of Lean
Lean Thinking was written by James J. Womack and Daniel T. Jones (2003). While
there is a little in this book is new, the authors have presented the concepts of lean
manufacturing in a persuasive way. The ideas of lean production are based within
the Toyota Production System (TPS) approach to the elimination of wastes in every
aspect of an operation.
1.2.1. Five principles of Lean
Lean principles are a framework to guide an organization while implementing Lean
Thinking (Womack and Jones, 2003). Although these principles are commonly
associated with manufacturing, they are just as valid for processes in other disciplines.
There are five basic principles of lean thinking highlighted by Womack and Jones.

Source: Lean Thinking (Womack and Jones,1990)
Figure 1.1: Five principles of Lean
Identify your customers and what they value
3


Every organization needs to understand which value the customer requires for their
products or services. It is this value that determines how much money the customer

is willing to pay for the product or services. This results in a top-down target costing
approach that has been used by Toyota and others for many years. Target costing
focuses on what the customer is willing to pay for certain products, features, and
services. From this the required cost of these products and services can be
determined. It is the company’s job to eliminate waste and cost from the business
processes so that the customers price can be achieved at great profit to the company.
Map the Value Stream
The value stream is the entire flow of a product’s life-cycle from the origin of the
raw materials used to make the product through the cost of customers’ utilization
and ultimately disposing of the product. Only by a study and clear understanding of
the value stream and its value-add and wastes can a company truly understand the
waste associated with the manufacture and delivery of a product and/or service.
Lean thinking advocates supplier and customer partnership and radical supply chain
management to eliminate waste from the entire value stream.
Create Flow to the customer
One very significant key to the elimination of waste is flow. If the value chain stops
moving forward for any reason, then waste will be occurring. The trick is to create a
value-stream where the product (or its raw materials, components, sub-assemblies)
never stop in the production process. Each aspect of production and delivery is fully
synchronized with the other elements. Carefully designed flow across the entire
value chain will tend to minimize waste and increase value to the customer.
Establish Pull based on customer demand
The way to ensure that nothing is made ahead of time and builds up work-inprocess inventory that stops the synchronized flow is to use a pull approach. A
traditional western manufacturer will use an MRPII or ERP style of production
planning and control whereby production is "pushed" through the factory based on a
forecast and a schedule. Pull approach states that we do not make anything until the
customer orders it. To achieve this requires great flexibility and very short cycle
times of design, production, and delivery of the products and services. It also
requires a mechanism for informing each step in the value chain what is required of
them today, based upon meeting the customer’s needs.

Seek continuous improvement
4


Lean manufacturers set their targets for perfection. The idea of total quality
management is to systematically and continuously remove the root causes of poor
quality from the production processes so that the plant and its products are moving
towards perfection. This relentless pursuit of the perfect is key attitude of an
organization that is "going for lean".
1.2.2. Four objectives of Lean manufacturing
There are four objectives of Lean Production such as Improve quality, Eliminate
wastes, Reduce time, and Reduce total costs. Firstly, it is to improve quality.
Manufacturing companies today must focus on producing, and delivering, highquality products to survive in the competitive market. While there are dozens of
different ways to improve the quality of manufactured products, lean manufacturing
is one of the best choice. By reducing unnecessary wastes, many companies can
shift their focus towards the product, investing additional time and resources into
making the products better.
A second goal of lean manufacturing, and arguably the most important, is to
eliminate waste. Manufacturing companies tend to produce a number types of
wastes, more than companies operating in other industries; it is only the nature of
the manufacturing industry. However, manufacturing companies can reduce their
wastes by focusing on the principles of lean manufacturing. Cutting unimportant
motion, reduce defective products and transportation cost, opting for recycled
materials, eliminate unused inventory and embracing other green, Eco-friendly
practices are just a few ways that companies can achieve this.
A third objective of lean is to reduce time. Companies that use lean manufacturing
will naturally benefit from faster production times. It shows that there is less waste
and greater overall efficiency in the workplace. Obviously, faster production times
will benefit a manufacturing company in several different ways: producing products
faster means lower overhead and more revenue, making lean manufacturing well

worth it in the long run.
The fourth and final objective of lean manufacturing is to reduce total costs. It may
be quite similar to reducing production time, because when products are produced
faster, it results in reduced total costs. Lowering costs allows companies to stay
competitive, which is important for success in the manufacturing industry.
To conclude, the objectives of lean manufacturing are to improve the quality of
5


products, eliminate unnecessary waste, reduce production times and reduce total
costs. Optimistically, this will give a better understanding of lean manufacturing and
why it is a popular and broad used philosophy in today’s marketplace.
1.2.3. Eight types of wastes
According to Lean production, the elimination of wastes may seem like a simple
and clear understanding. It is obvious these wastes are often identified. This then
hugely reduces the potential of such an aim. The elimination of waste is one of Lean
objectives, and TPS defined 3 types of waste: muda, muri and mura. It should be
noted that for many lean implementations this list shrinks to the first waste type
only with reduced corresponding benefits.
To connect these 3 concepts is simple in Toyota Production Systems and thus lean. At
first, ‘muri’ focuses on the preparation and planning of the process, or what work can be
avoided proactively by design. Next, ‘mura’ then focuses on how the work design is
implemented and the elimination of fluctuation at the scheduling or operations level, such as
quality and volume. In addition, ‘Muda’ is discovered after the process is in place and is
dealt with reactively. It is seen through variation in output. It is the role of management to
examine the ‘muda’, in the processes and eliminate the deeper reasons by considering the
links to the ‘muri’ and ‘mura’ of the system. The ‘muda’ and ‘mura’ inconsistencies must
be fed back to the muri, or planning, stage for the next project.
Therefore, the original seven ‘muda’ includes:
−


Transport (moving products that are not actually required to the

processing performance)
−

Inventory (all components, work in process, and finished product not

being processed)
−

Motion (people or equipment moving or walking more than is required to

perform the processing)
−

Waiting (waiting for the next production step, interruptions of production

during shift change)
−

Overproduction (production ahead of demand)

−

Over Processing (resulting from poor tool or product design creating activity)

−

Defects (the effort involved in inspecting for and fixing defects)


Taking the first letter of each waste, the acronym "TIMWOOD" is formed. This is a
6


common way to remember the 7 ‘muda’ Many others have added the "waste of
unused human talent" to the original seven types of wastes. For example, six
sigma includes the waste of Skills, referred to as "under-utilizing capabilities and
delegating tasks with inadequate training". Other additional wastes added were for
example "space". These wastes were not originally a part of the seven deadly wastes
defined by Taiichi Ohno in TPS, but were found to be useful additions in practice.
1.3. Tools of Lean Manufacturing according to Toyota Production System
There are many tools of Lean Manufacturing. However, TPS is the first system
which created and applied successfully in their production process. Therefore, this
thesis will mention about Lean’s tools following TPS.
1.3.1. Toyota Production Systems
The Toyota Production System (TPS) came up with a necessity in response to the
situations surrounding the company. Many of the foundational concepts are old and
unique to Toyota while others have their roots in more traditional sources.
The oldest part of the production system is the concept of Jidoka which was created
in 1902 by Toyoda founder Sakichi Toyoda. This concept refers to notion of
building in quality at the producing process as well as enabling separation of man
and machine for multi-process handling. The origins of this concept began in the
Toyoda Spinning and Weaving company which was founded by Sakichi Toyoda.
Sakichi Toyoda invented a loom that automatically stopped whenever it detected
that a thread was broken. This loom stopped the process from created defective
material. Later in 1924 he created an automatic loom that allowed a person to
operate multiple machines. The rights to manufacture the loom outside of Japan for
were finally sold to the Platt Brothers Ltd. in England. This money was then
partially used to start an automotive division that was later spun off in 1937 as a

separate business and company under Kiichiro Toyoda the son of Sakichi.
After World War II Taiichi Ohno a promising engineer in the Toyoda Spinning and
Weaving Corporation was brought over to the automotive side of the business. He
was given the task of improving operational productivity and driving in the
concepts of Just-In-Time and Jidoka. He was appointed machine manager of an
engine plant and experimented with many concepts in production between the years
of 1945-1955. His work and effort is largely what com resulted in the formulation
of what is now acknowledged as the Toyota Production System. There are
numerous other people inside the company that contributed to the overall
7


development of the company and the production system.
1.3.2. Tools of Lean Manufacturing
There are also many other tools and techniques that were developed in Toyota such
as 8 types of Wastes, Standardized Work, SMED, 5S, Error Proofing, Visual
Control, as well as many others.

Source: Toyota Motor Corporation
Figure 1.2: Toyota Production System house
There are two primary pillars of the system such as Just-in-Time and Jidoka. The
first and most famous one is Just In Time (JIT). The JIT concepts focus on produce
and deliver the right parts, in the right amount, at the right time using the minimum
necessary resources. This system reduces inventory, and strives to prevents both
early and over production. Producing following a JIT model reveals a lot of
problems quickly. With less inventory in a system the “rocks” are quickly exposed
in production that are disrupting flow. Most companies avoid problems, avoid
potential disruptions and use inventory to hide these problems. However, in TPS the
opposite side of logic is applied. By reducing inventory you expose the real
problems in a producing process quickly and focus on improvement. This

conception of surfacing problems and abnormalities is a critical concept in TPS.
Undoubtedly, unless you can solve the problem that you expose there is a danger to
8


this approach.
The most important factor of the TPS is obvious the Just in Time model of the
production system. The phrase Just in Time was created by Kiichiro Toyota in 1937
after the start of Toyota Motor Corporation. The company was poor and not able to
waste money on excess equipments or materials in production. Everything was
expected to be procured just in time and not too early or too late. Later elements
developed in the 1950’s including takt time, kanban, standardized work, and
supermarkets added to the basis for JIT.
Secondly, Jidoka (Build in quality) is another pillar of the system. There are two
parts of Jidoka. They are “Building in quality at the process” and “Enabling
separation of man from machine in work environments”. Jidoka is a Japanese word
that ordinarily mean automatic or automation. However Toyota puts a specific twist
on this word by adding a what is known as a “radical” in depicting kanji characters.
The radical added to the left of one of the kanji characters in Jidoka means
“human”. In other words Toyota Production Systems aspires for processes which
are capable of making intelligent decisions and shutting down automatically at the
first sign of an abnormal condition such as a defect, or other problem. The goal is
not to run continuously but in other words to stop running automatically when
trouble happens. This automatical stop function helps stop defects from escaping
downstream, prevents injury, limits machine damage, and enables a better look at
the current condition whenever there is a problem.
Much like the logic of JIT this concept of Jidoka is counterintuitive. In other words
it is better to stop a machine at the first sign of trouble than to keep on producing
the problem which only generates more waste.
Another component of Jidoka is the separation of man from machine. When

machines possess the ability to stop in the event of a problem then there is no need
for humans to stand and watch a machines. Jidoka frees people being tied to
machines and monitoring them and puts people to use in a more value added
fashion. This ability to separate man from machine reflects Toyota’s respect for the
employee and is an important enabler for Standardized Work to flourish.
There are several important components to TPS: takt time, leveling (heijunka),
pull via kanban, and flow production.
The foundation of TPS is Level Production. By smoothing or leveling customer
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requirements over time, we can better utilize our resources and ensure continuous
production. Averaging volumes and model mix requires smaller lots and in the best
cases “batch of one” capability from raw materials to finished goods.
The bedrock of this system is Equipment Reliability. Without reliable equipment,
we must build inventories (just in case), or invest in more equipment (due to
unexpected downtime). Proper maintenance of equipment will ensure that it is
available when we need it.
In contrast to the conventional production system, in which systematic batch
production with large lots is believed to have a maximum effect on cost reduction,
the Toyota manufacturing philosophy is to make the smallest lot possible, and do so
by setting up dies and machines in the shortest time possible.
The production system philosophy of Toyota shows a manufacturing culture of
continuous improvement (Kaizen) based on setting standards aimed at eliminating
waste through participation of all employees. The goal of the system is to reduce the
timeline from the time an order is received until the time it is delivered to the actual
customer. Ideally the system strives to produce the highest possible quality, at the
lowest possible cost, with the shortest lead-time possible.
1.4. Application of Lean Manufacturing
Among a number of Lean manufacturing applied methods, the thesis concluded and

gave an appropriate process of application of Lean Production for elimination
wastes purpose.

Figure 1.3: Application of Lean Manufacturing
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Stage 1 – Identify Wastes
According to the Lean Manufacturing philosophy, waste always exists in all
producing process, and no matter how good your process is, it can always be better.
This commitment to continuous improvement is known as Kaizen.
One of the key tools used to identify this waste is a Value Stream Map. This
illustrates how materials and production processes flow through your organization
to bring your product or service to the customer. It focuses on how actions and
departments are connected, and it highlights the waste. If you analyze the Value
Stream Map, you will see the processes that add value and those that do not. You
can then create a "future state" Value Stream Map that includes as few non-valueadding activities as possible.
Stage 2 – Analyze the Wastes, and Find the Root Causes
For each waste you identified in the first stage, point out what is causing it by
using Root Cause Analysis. If a machine is constantly breaking down, you may
think the problem is mechanical and decide to purchase a new machine. But Root
Cause Analysis could reveal that the real problems are poorly trained operators who
do not use the machine properly. Other effective tools for finding a root cause
include Brainstorming and Cause and Effect Diagrams.
Stage 3 – Solve the Root Cause, and Repeat the Cycle
Using an appropriate problem-solving process, decide what you must do to fix the
issue to create more efficiency. And repeat the Cycle if you find any wastes in your
company.

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CHAPTER 2
COMPANY PROFILE AND METHODOLOGY
2.1. Nam An Mechanism and Environment Joint Stock Company’s profile
2.1.1. Overview of the company
Nam An Mechanism and Environment Joint Stock Company experienced 16-year
operating and producing. The timeline below illustrates the process of formation
and development of the company.
Figure 2.1: Milestones of Nam An company

(Source: The company regulation)
In 2000, Nam An Mechanism and Environment Limited Liability Company was
founded. However, there were three persons decided to invest in the company in
2004 so Nam An’s Board of Directors changed their name into Nam An Mechanism
and Environment Joint Stock Company. Five years later, the company spread their
business by building a new factory in Hai Duong province which produced for
customers in Quang Ninh and Hai Duong region. Recently, Director of the company
has pointed out life standard of employees would effect to productivity, therefore,
he decided to expand the factory in Bac Ninh province in double size.
Nam An M&E JSC is a manufacturer in heavy industry. The company focuses on petroleum
systems, boiler, compressor, etc. The list below is the main business of the company:
− Manufacture and purchase machineries and spare parts
− Manufacture of fabricated metal products, barrels tanks, boilers
− Build civil and industrial constructions
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− Design and manufacture pressure equipment and industrial fans
− Manufacture and install fuel tanks in cars

− Manufacture vacuum systems, industrial dust treatment, water purification
equipment
− Transfer technology in waste treatment and environment field, etc.
− Provide transportation services
− Construct stations of petroleum and petroleum products (gas, asphalt,
chemicals)
− Sell of supplies, specialized petroleum equipment, construction materials,
chemicals and other petroleum products
The products and the constructions made by the company not only ensure technical
and quality standards, progress and art, but also lower the products’ cost. The
company is trusted by all domestic and foreign investors.
For many years Nam An has executed many constructions, designed and
manufactured a lot of line of process for various fields of industrial equipment
systems such as:
− Compressed air systems, 10T /h boiler
− System of industrial water treatment, waste treatment systems
− Exhaust fans, and dust treatment systems, industrial drying paint ovens
− Storing petroleum tanks and petroleum retailers
− Oil tank trucks
− Coal gasification furnace system
Main products of Nam An M&E JSC are divided into 4 groups: Compressed air
systems, Oil and petroleum tanks, Industrial water, Waste and Dust treatment and
Coal gasification furnace system.
Compressed air system is a type the system that contains air in thicker shape. For
example, Oxygen tank is a compressed air system. It is easy to find in some
hospital, doctors use oxygen tanks when their patients get trouble in breath (An
example of product see Figure 5.1 in Appendices).
The oil and petroleum tanks are used by petroleum retailers, they need these tank to
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