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3M stands for MUDA, MURA, MURI – three enemies of productivity. MUDA is waste, MURA is unevenness and MURI is overburden. The goal of Lean is to deliver increased value to the customer through eliminating wasteful processes. When one talks about waste in this sense, often they refer to the seven wastes in manufacturing or Muda from the 3M model. Mura and Muri are often excluded from the picture but knowing these two is crucial as they are more likely to have caused Muda to appear in the first place. They are all interrelated and are all considered wastes. One does not look for Muda alone and hope to solve a process problem completely. It would be more likely that you need to sort out Mura and Muri first to eliminate Muda. This will ensure that the risk of Muda returning to your process is mitigated
Equipment depreciation & other cost Energy Cost Labor Cost Purchased parts cost Material Cost MUDA 3M - Muda Mura Muri BUSINESS MODELS Cost Plus Model (Traditional Corporate Finance) Most organizations believe and build their models based on the following model: 𝑪𝒐𝒔𝒕 + 𝑷𝒓𝒐𝒇𝒊𝒕 𝑮𝒐𝒂𝒍 = 𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆 This describes, in general, the corporate finance worldview The main assumption and emphasis in the traditional corporate finance worldview are the following: • Costs is fixed (not controllable) • Price is determined by the company policy or profitability goal The corporate finance worldview might be illustrated as a traditional cost plus model: BUSINESS MODELS Lean Thinking Model (Costs are Controllable) In contrast to the traditional corporate finance worldview, the Toyota Production System or lean views the model differently and with a different emphasis: 𝑷𝒓𝒐𝒇𝒊𝒕 = 𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆 – 𝑪𝒐𝒔𝒕 In the Lean Thinking model, the belief and emphasis are the following: • Costs are controllable and can be reduced through the application of lean manufacturing methods • Sales Price is determined by what customers are willing to pay, not by company profitability policies (EBITDA Goals) The Lean Thinking model might be illustrated like this: PRODUCTION METHOD AND COST There are kinds of cost 1st – the cost that every company has to bear to produce the same product 2nd - the cost that differs among companies by production method The production method cost can be reduced by operator creativeness and strong efforts Cost which differs due to production method Equipment depreciation & other cost Energy Cost Labor Cost Purchased parts cost Material Cost Cost MUDA Cost which every company incurs REDUCING COSTS VS CUTTING COSTS There can be a view that cost can be reduced by cutting but there is a difference in Cost Cutting and Cost Reduction Cutting costs • Temporary measure • Reversible • Painful/drastic Reducing costs by “Waste Elimination” • Genuine cost reduction(Not just reduction of expenses) • Irreversible • People acceptance • Impacts both top and bottom line 3M – MUDA, MURA, MURI 3M stands for MUDA, MURA, MURI – three enemies of productivity MUDA is waste, MURA is unevenness and MURI is overburden The goal of Lean is to deliver increased value to the customer through eliminating wasteful processes When one talks about waste in this sense, often they refer to the seven wastes in manufacturing or Muda from the 3M model Mura and Muri are often excluded from the picture but knowing these two is crucial as they are more likely to have caused Muda to appear in the first place They are all interrelated and are all considered wastes One does not look for Muda alone and hope to solve a process problem completely It would be more likely that you need to sort out Mura and Muri first to eliminate Muda This will ensure that the risk of Muda returning to your process is mitigated A good understanding of all three will surely help any business in streamlining their processes INTERRELATION OF 3M Let’s take some examples to understand how these three are interrelated MUDA Suppose a company’s manufacturing department is rated based on the units they produce monthly This leads them to constantly increase their output monthon-month to depict an uplift in their production By the MURA MURI last week of the month, the department realizes they are still short of their target units, and so they ramp up production before the month closes off This sudden peak in production (Mura) leads to the employees and machines operating more than their full capacity (Muri) Not necessarily backed by customer demand data, the increase in units produced also leads to overproduction (Muda) Concept of 3M- Truck Example A firm that needs to transport tons of materials to a customer has several options Option #1 – all ton boxes in truck 1T 1T 1T 1T 1T 1T MURI Overburdened Option #2 – all ton boxes in truck but unevenly 1T 1T 1T 1T 1T 1T MURA Unevenness Concept of 3M- Truck Example Option #3 – all ton boxes in trucks but evenly 1T 1T 1T 1T 1T 1T MUDA Waste Option #4 – all ton boxes in truck but evenly MURI 1T 1T 1T 1T 1T 1T Overburdened MURA Unevenness MUDA Waste UPCOMING SERIES Upcoming post will address following for each of the M in 3M What is Muda, Mura, Muri? Examples Their interrelations How to identify and reduce/ eliminate Thank You!!! Journey Continues