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
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 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 CHAPTER CONCEPTUAL FRAMEWORK OF LEAN MANUFACTURING 1.1 Definitions of Lean Manufacturing 1.4 Application of Lean Manufacturing 10 CHAPTER 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 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 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 CHAPTER CONCEPTUAL FRAMEWORK OF LEAN MANUFACTURING 1.1 Definitions of Lean Manufacturing Figure 1.1: Five principles of Lean Figure 1.2: Toyota Production System house 1.4 Application of Lean Manufacturing 10 Figure 1.3: Application of Lean Manufacturing 10 CHAPTER 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 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 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 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 CHAPTER CONCEPTUAL FRAMEWORK OF LEAN MANUFACTURING 1.1 Definitions of Lean Manufacturing Figure 1.1: Five principles of Lean Figure 1.2: Toyota Production System house 1.4 Application of Lean Manufacturing 10 Figure 1.3: Application of Lean Manufacturing 10 CHAPTER 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 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 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 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 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), Objectives (Improve quality, Eliminate wastes, Reduce time, and Reduce total costs), 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 Figure 5.1: Clorine purifier Figure 5.2: Engineering certification at Nam An M&E JSC Figure 5.3: Solder certification at Nam An M&E JSC Figure 5.4: Questionnaire defining operations situation at Nam An Mechanism and Environment Joint Stock Company in English Dear Sir/Madam! I am Nguyen Thu Phuong, student at Enterprise Management – Excellent Education Program – 55 in National Economics University I am researching operations of the company in order to complete my Bachelor’s thesis in university I sincerely hope you help me finish this questionnaire I appreciate that so much The questionnaire has 22 questions which include 01 open question and 21 multiple choice questions, answer by select (tick X) in the most suitable number The multiple choice questions have scale of point: • • • • • point: Extremely Disagree point: Disagree point: Neutral point: Agree point: Extremely Agree No Question i ii Overproduction The company had produced excess quantity of products for forecasting Queues There is amount of idle time between each batch of production cause to wait because of materials storage The amount of idle time that machines not use is high The ineffective processing order leads to employees and machines did not work at full capacity iii Transportation The location of warehouses and factory is not convenient for transportation of materials and delivery to customers The arrangement of warehouses and machines position results to the over-movement of workers in the production process Delivery trucks are not full before move iv Over-processing Organizational management structure is redundant and wasteful Process of quality control is not appropriate 10 v 11 12 13 vi 14 General and administrative expenses are high Inventory The number of inventory is large Warehouses are always full of finished products and semifinished products produced by the company The company has imported and stored outdated and no longer worth using materials Motion Workers have many redundant motions so it takes a lot of time in the production process There are many redundant motions (stand up, bend down, 15 search, pick up) due to the arrangement of raw materials are not appropriate vii Defective product 16 The number of defective products is high 17 The company has many times compensated for defective products viii Human 18 Many workers don’t complete the target 19 Work performance does not increase after training 20 The layout of workers has not been optimized Company leaders have not listened to the opinion of 21 workers and allocated the right person to the right job, right place 22 Do you have any recommendation in order to reduce the above wastes? If yes, please specify ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… The questionnaire above is about researching the corporate operations situation I extremely promise this is security and only using for researching purpose I sincerely thank you because of completing this questionnaire Wish you have an effective working day Figure 5.5: Questionnaire defining operations situation at Nam An Mechanism and Environment Joint Stock Company in Vietnamese PHIẾU TÌM HIỂU THƠNG TIN TÌNH HÌNH HOẠT ĐỘNG CỦA DOANH NGHIỆP Xin chào Anh/ Chị! Em Nguyễn Thu Phương, sinh viên lớp Quản trị doanh nghiệp – Chất lượng cao – K55 trường Đại học Kinh tế Quốc dân Em tìm hiểu q trình sản xuất Cơng ty để viết chuyên đề tốt nghiệp trường Kính mong anh/chị giúp đỡ cách trả lời câu hỏi sau Em xin trân trọng cảm ơn! Bảng khảo sát bao gồm 22 câu hỏi có câu hỏi mở 21 câu hỏi lựa chọn cách đánh dấu (X) vào nhận định phù hợp Câu hỏi lựa chọn có nhận định tương ứng với thang điểm từ đến 5: • • • • • điểm: Hồn tồn khơng đồng ý điểm: Không đồng ý điểm: Trung lập điểm: Đồng ý điểm: Hoàn toàn đồng ý STT Câu hỏi I Sản xuất dư thừa Doanh nghiệp sản xuất thừa số lượng sản phẩm để dự phịng trước II Thời gian chờ đợi hay trì hỗn Thời gian cơng nhân nhàn rỗi đợt sản xuất nhiều chờ nhập nguyên vật liệu, máy móc Thời gian máy móc thiết bị khơng sử dụng nhiều Việc xếp thứ tự sản xuất sản phẩm dựa theo hình thức chưa tối ưu dẫn đến tình trạng cơng nhân máy móc khơng hoạt động hết công suất III Vận chuyển hay di chuyển Địa điểm đặt kho bãi, nhà xưởng không thuận tiện cho trình vận chuyển nguyên vật liệu giao hàng đến khách hàng Việc xếp kho bãi, vị trí máy móc khiến cơng nhân phải di chuyển nhiều q trình sản xuất Xảy tình trạng xe chở hàng chưa lấp đầy mà di chuyển IV Q trình hoạt động Mơ hình tổ chức quản lý rườm rà, lãng phí Quy trình kiểm sốt chất lượng sản phẩm khơng phù hợp 10 Chi phí quản lý doanh nghiệp cao V Tồn kho thành phẩm bán thành phẩm 11 Số lượng nguyên vật liệu tích trữ kho lớn 12 Kho chứa hàng có ln đầy thành phẩm bán thành phẩm cơng ty sản xuất 13 Doanh nghiệp nhập tích trữ ngun vật liệu lỗi thời, khơng có giá trị sử dụng VI Thao tác thừa 14 Công nhân có nhiều thao tác thừa, tốn thời gian trình sản xuất 15 Có nhiều hành động thừa (Đứng lên, cúi xuống, tìm kiếm, lấy đồ) xếp kho nguyên vật liệu, tài liệu chưa hợp lý VII Sản xuất lỗi/khuyết tật 16 Số lượng sản phẩm lỗi/khuyết tật cơng ty nhiều 17 Doanh nghiệp có lần đền bù sản xuất lỗi/khuyết tật VIII Nguồn nhân lực 18 Số lượng cơng nhân khơng hồn thành mục tiêu đề nhiều 19 Hiệu suất làm việc không tăng không sau lần đào tạo 20 Việc bố trí nhân cơng chưa tối ưu 21 Lãnh đạo công ty chưa lắng nghe ý kiến công nhân, người lao động chưa trọng dụng, giao việc, chỗ 22 Anh/Chị có đề xuất giải pháp giúp hạn chế lãng phí khơng? ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… Trên bảng câu hỏi khảo sát lãng phí doanh nghiệp Em xin cam đoan câu trả lời anh/chị bảo mật phục vụ cho mục đích học tập Em xin chân thành cảm ơn anh/chị hoàn thành bảng câu hỏi Chúc anh/chị ngày làm việc vui vẻ Table 5.1: Nam An M&E JSC, Balance sheet in period 2012 - 2016 2012 2013 2014 2015 2016 Assets Current Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets 1,308 10,466 791 3,807 15,916 9,329 8,028 21,491 10,323 10,550 12,635 24,683 40 120 81 329 27,589 30,467 21,536 50,311 2, 156 27,2 34 16,8 05 1, 999 48,1 94 Fixed (Long-Term) Assets Long-term investments Property, plant, and equipment (Less accumulated depreciation) 4,640 (1,191) 13,333 ( 3,349) 17,619 ( 4,326) (4,673) 28,8 27 (5,9 05) 22,727 22,9 22 27,400 Intangible assets Total fixed assets Other Assets Other 3,448 9,984 13,292 Total Other Assets Total Assets 59 254 127 326 508 59 254 127 326 31,097 40,705 34,957 73,364 508 71,6 24 Liabilities and Owner's Equity Current Liabilities Accounts payable Short-term loans Income taxes payable Unearned revenue 19,8 49 5, 180 5,714 5,814 5,129 22,201 9,380 900 2,700 7,640 49 227 3,420 8,915 57 10,9 86 38,983 36,7 01 305 5,236 10,540 Current portion of long-term debt Total current liabilities 20,635 17,254 11,299 Long-Term Liabilities Long-term debt Total long-term liabilities 10,000 10,000 Total liabilities 20,635 17,254 11,299 48,983 36,7 01 Owner's Equity Owner's investment Retained earnings Total owner's equity Total Liabilities and Owner's Equity 10,000 22,000 22,000 22,000 461 1,451 1,657 2,389 10,461 23,451 23,657 24,389 31,097 40,705 34,957 73,373 22,0 00 2, 923 34,9 23 71,6 24 Table 5.2: Nam An M&E JSC, Cash Flow statement in period 2012 - 2016 For the Year Ending Cash at Beginning of Year Cash at End of Year Operations Cash receipts from Customers Other operations Cash paid for Inventory purchases General administrative expenses Wage expenses Interest Income taxes Net Cash Flow from Operations Financing Activities Cash receipts from Issuance of stock Borrowing Cash paid for Repurchase of stock (treasury stock) Repayment of loans Dividends Net Cash Flow from Financing Activities Net Cash Flow 31/12/2012 21/01/2014 190,698 287,445 287,445 462,976 2012 2013 31/12/2014 462,976 640,291 2014 31/12/2015 640,291 1,041,279 2015 31/12/2016 1,041,279 1,341,938 2016 39,812 60 81,088 78,989 120 177,049 164 144,230 191 40,857 3,765 256 47 84,799 80,417 5,138 221 56 166,931 83,493 7,232 171 106 170,115 175,500 18,800 132 371,648 136,444 13,444 654 264 295,228 8,580 3,500 4,500 22,140 1,800 3,366 5,100 2,700 7,200 3,630 11,946 96,746 8,600 175,531 7,200 177,315 29,340 400,988 5,430 300,658 Figure 5.6: Nam An M&E JSC, The relationship between Current Assets and Fixed assets in period 2012 - 2016 Figure 5.7: Nam An M&E JSC, The relationship between Liabilities and Equity in period 2012 - 2016 Table 5.3: Nam An M&E JSC, Financial ratios in 2016 Unit: % Ratio Formula Ratio Industry average Comment Liquidity Current Current assets / Current liabilities 131.31 131.00 High Quick (Current assets - Inventories) / Current liabilities 85.52 74.00 High Inventory turnover Sales / Inventories 858.24 238.00 High Current asset turnover 299.27 123.00 High 201.37 75.00 High Operating margin Operating income (EBIT) / Sales 0.62 3.00 Poor Profit margin Net income / Sales 0.49 1.00 Poor Basic earning power EBIT / Total assets 1.24 1.00 High ROE Net income / Common equity 3.24 2.00 High ROA Net income/ Total assets 0.99 1.00 Poor Asset management Sales / Net current assets Total asset turnover Sales / Total assets Profitability (Source: Annual Report in 2015) 55 Table 5.4: Key target for the period 2016-2020 of Nam An M&E JSC KEY TARGETS FOR THE PERIOD 2016-2020 TARGETS AVERANGE GROWTH Total assets 21%/1 years Profit before tax 12%/ year ROA 27% ROE ≥ 20% (Source: Annual report in 2015) 56 ... 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... 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... 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