How to Set Up a Lean Factory That Works – Part 2

How Can a Lean Factory Tollgate Process Work?

How can a lean factory tollgate process work? Here is a sample tollgate path for re-working your facility’s layout – or setting it up from scratch.

Read Part One

Part 2 of Lean Factory: a 2-part series

How Can a Lean Factory Tollgate Process Work?

Here is a sample tollgate path for re-working your facility’s layout – or setting it up from scratch.

Tollgate 0 – Completely evaluate brownfield and greenfield approaches. Step 1 tasks will include activities such as measuring equipment sizes, utility requirements (electricity: voltage, phase, amperes), water and wastewater, gases (natural gas, propane, argon, etc.), compressed air) for the reconfigured or new space. During the tollgate meeting, ask questions that relate your facility to utilities, space and load considerations. For example, Will we need to initiate any permitting processes for emissions? Are there structural considerations? Can the floor handle the static load of a machine? If we are moving to a new space, does it include warehouse areas with floors engineered for a light load?

Still not sold on a brownfield? A machine tool company we worked with made the decision to move to a new facility. The building was part of a larger industrial park that was located in the same town. The move went well, and through the luxury of moving to a completely new facility, they were able to operate in the old facility while the new facility was being tooled up. When the first unit in the new building was completed, there was a celebration, complete with the breaking champagne bottle and a toast for all.

Good ending, right? Not so fast. In the subsequent transition, the access road had not been completed. While trucks were able to negotiate the muddy street to move parts and raw materials into the facility, completed units were not able to be moved out, due to weight and size of the completed unit. This example illustrates the importance of making sure that developers and contractors will complete all aspects of your new building and the surrounding environment before production begins.

Tollgate 0 checklist

  • Tollgate plan (critical tasks to be reviewed at each tollgate)
  • Core team members identified
  • Team leader identified
  • Support team members identified
  • Review team members identified
  • Brownfield alternatives
  • Greenfield alternatives
  • Core and support team recommendation
  • Projected budget established for capital and expense
  • Review and approval

Tollgate 1 – Define value streams and preliminary floor plan

 Accurately identify product and process families.

Your lean factory team should use product quantity and/or product routing as the tool to identify product families. Why? Sometimes a ‘bracket’ isn’t a bracket. Part nomenclature is a fair way to begin this process, but it’s crucial to identify how the part is really made.

While all brackets may be in the same part family, they may be in different process families. At one company, some brackets were formed and welded sheet metal assemblies, while other brackets were machined from forgings. These configurations resulted in very different process families.

For assembled products, analyze the assembly sequence through a critical path analysis. What is the ‘foundation’ for the assembly? Consider the elements required in sequence of assembly? If the assembly time stretches over a number of shifts or days, is there a delay due to a chronic part shortage? Examine the bills of material and understand the sequence in which parts are issued out of material stores. Occasionally, a sub-assembly’s parts are issued when the sub-assembly is needed for main assembly. There may be some re-engineering or re-sequencing of the part and sub-assembly timing.

Map it out: VSMs and spaghetti diagrams. Map the value streams in their current state. Then, map the ‘to-be’ value stream incorporating the revised process families. It is important to maintain the correct level of detail and data. Too much detail, and you will miss opportunities to consolidate products into common processes; not enough detail, and the operational processes all resemble one another. I’ve written more about VSMs in this post.

Compile the ‘spaghetti’ charts. How does the part flow through the shop? How does the assembly move through the shop? Does an outside supplier do the processing? How accessible is the shipping area for materials in and products out? Your spaghetti charts should reflect current routings. The core team will lay out the proposed new arrangement and draft seven different scenario proposals.

Present Your Findings

Next, the core team presents the seven proposals to the larger team. Gather all input and opinions. The larger team should have been trained in lean – concepts such as value streams, spaghetti charts, PQPR, etc. – in preparation for the move. They should be briefed on all the supporting documentation BEFORE layouts are presented. The logic and quantitative data will enable the core team to present layouts in a matter-of-fact manner and will go a long way to diffuse pre-conceived notions.

Why seven layouts? It’s an old rule of thumb, simply explained: It requires thinking and creativity to get to seven layouts. What’s important to remember is that cost is a consideration. So it becomes a balancing act between optimal process flow and cost. The process to get to seven layouts may include a no-cost limit layout or two, but in turn the ideas created by those layouts may ultimately reveal the best layout at the lowest reasonable cost.

How will the organizational structure support the value streams? Size matters – for smaller companies, organizational alignment may remain the same. But for larger companies, aligning each of the support functions in a value stream allows people to focus on improving their product line, not all product lines.

The tollgate 1 meeting is the critical step in moving forward. The value streams have identified product or process families, detailed work is complete for cell sourcing and equipment for the manufacturing processes is complete. Any facility requirements have been identified, equipment and service (HVAC, major electrical, plumbing, gas) have been specified, and at the conclusion of the meeting, the “go” decision sets in motion the activities to begin the move.

If there are any doubts from the executives, it’s a “no-go” decision. There will be technical reasons such as incomplete or unsatisfactory engineering work that needs more thorough effort, market plans have changed, or the budget set at Tollgate 0 will be exceeded. The “no-go” decision will be issued with a cease work decision, or it will be to continue work within revised parameters with a date established for a Tollgate 1 meeting to be re-convened.

Tollgate 1 Checklist

  • Value stream maps
  • Product Quantity/Process Routing analysis
  • Product families
  • Spaghetti charts
  • Cell arrangement/facility layout
  • Organizational structure
  • Capital equipment plan
    • New, additional
    • Upgrades, modifications, overhaul
  • Facility equipment plan
  • Facility upgrade and improvements plan
  • Preliminary expenditure profile complete
  • Preliminary budget
  • Customer risk assessment
  • Evaluate and modify the project plan

Tollgate 2 – Facility requirements, preliminary budget and expenditure profiles for capital and expense are the primary concerns for this tollgate. You now have to begin preparing the facility itself for the restructuring. There could be demolition of current interior structure, re-routing of utilities and upgraded elements for the floors (machine foundations).

Example of a Tollgate Nightmare

A major healthcare facility we worked with encountered an especially problematic move. As the facility itself grew, the organization also absorbed other facilities within a 10 mile radius. It soon became clear that testing capabilities needed to be consolidated. The consolidated testing facility required updated equipment. Holes had to be dug for foundations. Internal walls needed to be torn down and new walls erected to house sensitive equipment. Other rooms needed special structure and shielding on all internal surfaces. Controlled-access entries were required for certain areas of the various facilities. In other areas, the access controls needed to be removed. And all the while, patients were coming in for evaluation, testing and/or treatment.

Planning the New Layout with Full-scale Mockups

Once the best proposal is selected from the seven options, the plant engineering team needs to identify utility locations for the new layout. Where will the main power, water, and gases flow? How will these be routed to each cell or workstation?

After engineering’s assessment, a detailed plant layout must be completed. From this, a full-scale mock layout of each area should be created in an open space. Use full size cardboard cutouts and tables that can simulate machines. In some cases, you may be able to use showroom equipment. Spare toolboxes can be wheeled into place. The mock layouts will help everyone visualize what the new layout will look like.

Of course, depending upon the scope of the project and the amount of work, some projects require outsourcing the engineering work. Remember, even internal facilities engineering teams, will have daily, on-going support requirements that take precedence over consolidation and re-engineering design work. Prepare for this reality by contacting potential contractors and requesting and preliminary quotes for outside support.

Amid Chaos, Work Must Continue

How will employees access your facility and continue production during your reconfiguration? One company erected a structure for additional office and materials lab space. That created a problem, as that structure prevented access to the loading dock for tractor trailers. (In short order, an additional driveway was added). Bottom line is that you must evaluate and review all aspects of the project.

Tollgate 2 checklist

  • Facility structural modifications and upgrade requirements
  • Construction contractors selected and commence work
  • Current expenditures
  • Expenditure profiles for capital and expense
  • Refined budget
  • Electrical service upgrades (additional requirements)
  • Electrical service (internal routing, repositioning and upgrades)
  • Alternate work plans for production personnel
    • Shift differential
    • Paid or unpaid time off
    • Redirected effort to help with the move
  • Water and sewage
  • service water and treatment
  • industrial gases
  • information infrastructure
  • commercial traffic access and egress
  • Evaluate and modify the project plan
  • Long lead time raw material orders have been placed

Tollgate 3 – Upon the completion of the Tollgate 2 meeting, the work of formalizing the timing of the moves begins. At this meeting, the team will need to present the sequence and timing of the moves, and the planned return to production for a newly built cell. (Don’t forget to consider access to the new areas for the personnel and the material, as well as safety considerations). You will have to make decisions on whether it’s a complete shutdown or a phased approach. Incremental moves are the typical method, but the open ‘hole’ has to be created first. Surplus old equipment, eliminate obsolete tooling and inventory, perhaps tear down freestanding offices in the plant. Either way, you will need to be very specific about the sequence of machine moves and re-installation procedures.

While planning at a very detailed level may seem burdensome, it will allow you to handle any unforeseen circumstances as they arise during the moves. Get your contractors involved. The rigging contractor will help devise a series of machine moves that’s most expedient and safest for all. They will also be able to schedule any specialized equipment they will need to move your machinery. One company had to contact the city police to prepare for a street shutdown, as the crane to move equipment from floor to floor was placed in the street. The police had to provide traffic control as the street had to have alternating traffic. Talk about detailed equipment moves and timing!

Evaluate the risk to customer schedules. Can the customer receive material delivered early? Do we have to store it, necessitating the temporary lease of warehouse space? The search for appropriate subcontractors should yield some relief – perhaps current subcontractors can expand their capacity while internally, we plan an expanded production schedule through overtime and added temporary staff. All measures must be taken in order to meet customer schedule requirements, almost at any cost. In some rare instances, we’ve experienced the customer absorbing some of the work themselves. Most of the time, though, they have taken early delivery or pushed out their own schedules when they have that flexibility.

The machine tool suppliers will need to be notified for the move. Some machinery requires supplier set-up and calibration. This is another reason to have the move sequence and timing locked in.

Are there some other tasks that aren’t contingent upon the machinery being moved into value streams? Co-locate the personnel. Get the new organization up and running. If you need to revise workflows in your ERP, get those on the schedule to be completed. The moves will be done almost overnight. The culture and organization re-alignment that needs to take place to take full advantage of the value stream concept will take months. Get going now.

  • Budget on track
  • Expenditures properly categorized
  • “Surprises” discovered and mitigating measures taken
  • Utilities secured; alternate or temporary service necessary?
  • All contractors specified, selected and scheduled
  • All sub-contract production secured and first articles accepted
  • Raw material increased
  • Shop schedule ramped up and all areas on overtime
  • Infrastructure work specified and commences
  • Information technology upgrades commence

Tollgate 4 – After this tollgate meeting ends, phone calls to contractors are made. Consider this the “GO” moment. The move starts. This tollgate is the launch of the project. Contractors have been scheduled. Any production to provide parts ahead of customer schedule is complete. The reduced production schedule will be in effect until completion of the project. Your re-engineering team should have walked through the moves, representing the sequence of moves as best as practically possible. While your rigging contractor may have the moves worked out on his own, it would be helpful to have him walk with you through the sequence, too.

Keep in mind that you may have heavy equipment in your back lot, ready to be unloaded. Contractors are sitting in their trucks, waiting for the go signal. Everyone understands that all the information for the move is complete and accurate. All the tasks in all prior tollgates (don’t review them again at the task level!) are complete. You’ve outsourced some processes to subcontract machine shops. Preliminary utility work has begun and is on schedule. At the conclusion of this Tollgate 4 meeting, the green flag drops!

Given this illustration of a build-up to Project Go day, the circumstances of a “no-go” decision at Tollgate 4 can weigh heavily on the team and the general manager. If we delay, what’s the cost to contract a rigging crew (or two) plus their equipment for a day or two? If the project is postponed a week, what’s the impact on customer deliveries? To avoid these nightmares, do everything possible to anticipate and address problems before you get to Go Day. Tollgate 4 should be merely a “rubber stamp” meeting, with the project team leaders reciting what’s going to happen during the active phase.

Tollgate 4 Checklist

  • Facility structural modifications and upgrade requirements
    • All design work is finalized and approved
  • Current expenditures
  • Expenditure profiles for capital and expense
  • Refined budget
  • Parallel utility work has started and on schedule
  • Upgraded information infrastructure is functional
  • Long lead parts are completed to cover the lead time of the work interruption
  • Evaluate and modify the project plan

Tollgate 5 – Move complete; address support systems

This tollgate signifies the end of the project. Building modifications are complete. Machines are moved. You’re back in full-rate production (if it was ever reduced). Administrative realignments organized along the value stream layouts should be in progress. Information technology changes are in place, although any enterprise resource planning systems modifications may not be complete yet. This tollgate meeting is designed to review and resolve any unanticipated issues that have arisen during the move. Going back to my first example, the company that added on office space which impeded tractor trailer access addressed the issue in this tollgate meeting and developed a solution.

The effects your move will have on machinery should also be addressed. A company we work with moved all their CNC machines within three days. They communicated the reduced schedule to customers and built some product ahead of the three-day shutdown. They also planned to remove pallet changers from most of the machines as they were non-functional or not being used. The task affected one machine with an integral pallet changer.  Several solutions were developed. Since this was considered a “no-go” for Tollgate 5, the move was considered incomplete. The team assigned to the problem got it fixed. The Tollgate 5 meeting was re-scheduled for a week later when the machine was up and running. Move complete!

Here’s another example to help paint a complete picture for the challenges you may face in Tollgate 5. One company elected a “brownfield” restructuring of their operations. All machinery was returned to service on a rolling basis. Rather than move all machinery into cells at once, they sequenced the moves so as to only lose one cell’s output during the move and installation. In preparing electrical connections, the team discovered the circuit panels had started to deteriorate beyond safe limits. The move was declared complete at a Tollgate 5 meeting. However, the work necessary to upgrade and improve the plant’s electrical infrastructure had been determined to be outside the restructuring project. The situation snowballed: not only was the electrical service antiquated, but the main shop air supply had deteriorated and needed replacement. What a mess they had discovered! This situation illustrates the need to stay focused: primary planning and work must remain on the project at hand – in this case, the consolidation of machinery into a cell arrangement. Any “discoveries” along the way should be considered outside the project plan, unless it has an impact on returning machines to production.

If a new discovery does impact the project, how do you deal with it? The best way is to revisit the tasks leading up to (in this example) Tollgate 3. Re-work the timeline. Evaluate the risk to customers’ schedules. Can you operate in place – even with the moves partially complete – to create another window in the schedule? What is the budget going to look like now? Do you need to communicate with the board of directors? While these are logical questions, we sometimes don’t apply discipline to provide corrective action. These discoveries, if significant enough, should cause you to roll back to the prior tollgate and provide information on the impact of these issues. Will it affect production? Is it a critical issue that literally puts a stop to the entire project? Or, while the initial project carries on in parallel, in this example an entirely new infrastructure project was “tollgated” and a team assigned to handle it.

Don’t ‘Just Do It’

If your project veers off the road and lands in a ditch, avoid the “Just Do It” attitude. “Just Do It” can bring on a host of problems: Costs become uncontained. Work becomes haphazard and sloppy. Preserve the mantras of “plan the plan” and then “work the plan” in the forefront. This will help you manage project lead times and costs, despite serious setbacks.

After working through project snafus, thoroughly evaluate related budget and expenditures. The lessons learned from this review will help you ensure that future estimates are closer to actuals. Be sure to also evaluate the performance of contracted engineering services and trades.

While it seems superfluous, you may want to consider an open house for employees and their families. Along with that, you may want to have an open house for suppliers and another for customers. If you have a global operation, consider a video production or a web cam tour, although you will want to have it done professionally. The promotional video will say quite a lot about your company’s attitude to on-going business and will help spread the word that you’re a leading company in your field and you’re willing to invest to make yourselves even better.

Tollgate 5 checklist

  • Budget on track
  • Moves complete
  • Performance to customer schedule
    • “Recovery” plan (if necessary)
  • Issues uncovered during the project that don’t affect the project
  • Open house; customer plant tours; virtual video tour

Tollgate 6 – Post-activity analysis; next steps; continuous improvement

Whew! We’re done, right? Six months on, and you’re operating on all cylinders. Customer backorders have been fulfilled, a healthy book of work is being scheduled, and generally, the company is back to ‘normal’. It may be a ‘new normal’, but things are moving along. It’s about this time when you want to “tie a bow on the package”. Visit the tollgate checklists and all the information that went into each of the tollgate meetings.

You may look around the company and think, “This is the LAST time we do something like this in anyone’s career here”. Think again, what issues prompted you to undertake a major re-engineering project? How quickly did the idea develop into a real-life move? Your customer base won’t change, right? Your product/service won’t change, right? You won’t need to set up a new facility because the company has grown? Certainly, the market won’t change.

Of course they all change, almost on a moment-to-moment basis. So, don’t let competition catch up. You’ve done this to get a rung up on the competition, or in some cases, just catch up. It would be almost irresponsible to do nothing; not think of the big improvement opportunities. So, be ready for the next round of re-engineering activities with a review of the lessons learned by all over the life of the project.

What follows is a broader guideline of questions than the prior tollgate checklists. You may have further regulatory issues that need to be reviewed. There may be customer re-certification programs you will need to ensure are complete. And there’s the financial perspective – did we achieve, or are we on track to achieve, the financial improvements that we projected for our on-going operations? It may be a combination of cost reductions and added capacity. You will want to compare the targets established at Tollgate 1 with the results and performance after six months at Tollgate 6.

Tollgate 6 checklist

  • What compromises had to be made?
  • What does the customer performance look like?
  • Are further permits or regulatory inspections and certifications required?
  • What problems have been uncovered by this re-engineering and relocation project?
  • Has the market composition changed since we started? How does that affect our mix of product cells?
  • What’s the financial impact of the project? (six months of operations since Tollgate 5)

The seven tollgates have been described with examples for clarification and understanding. It is understood that safety and ergonomics are paramount in all aspects of the project, so it’s implied that all work is planned for safety, and is safely executed, and all concepts and designs are implemented with safety and ergonomics in the forefront, Environmental reviews with local and state authorities, along with suppliers should be conducted prior to each tollgate meeting.

The first steps in taking up a project is to understand current conditions, establish the metrics, what the predicted impact will be on the business, and what the corresponding metrics will be at the conclusion of the project. Then, carefully map out the checklists for each of the tollgates. This becomes your project plan, with hard dates set as milestones. Depending upon complexity, you may need to use a project management software with the tollgate dates and corresponding checklist items as the milestones. One company we consult with uses the tollgate process to manage its on-going operations, and they have all projects visually displayed on a floor to ceiling glass wall. It was only natural for them to codify their facility move in the same way on the wall. However, no one planned for what to do when the wall had to be moved.

Brownfield or greenfield? Revolutionary or evolutionary processes? Different markets or expansion of current markets? Any one of these reasons is enough to re-engineer your facility and operations for more effective, value added customer service. Do it correctly, wisely and in a disciplined manner and you will be up and running sooner and more effectively.

Final Thoughts

Whether your company is moving to a new facility or re-working its existing space, steps unique to your operation must also be baked into your plan.

To many, a greenfield move may appear easier. However, keep in mind that the construction of an entirely new facility needs to be factored into the project plan. There’s certainly work to be done in the brownfield reconfiguration. But the facility is usually a known commodity (for better or worse). Use the basic tools of lean thinking to create your lean factory. And always keep in mind that flexibility is paramount.


Daniel Penn Associates Senior Consultant Tom Voss has developed and implemented lean enterprise solutions for more than 25 years. Trained and mentored in Lean concepts by the founders of Shingijitsu Company, Ltd., renowned experts of the Toyota Production System, Tom held engineering, operations, finance, human resources and new business development positions at General Dynamics, United Technologies-Pratt & Whitney, JDS Uniphase and Franklin Products. His experience spans chemical, industrial, aerospace, automotive and telecommunications industries as well as insurance, banking and public sector services.

Questions or comments? Write us at info@danielpenn.com or call 860-232-8577.

As published in…

Industry Week - How to Set Up a Lean Factory That Works,

Speak Your Mind

*