Setup Reduction (often known as Single Minute Exchange of Die or SMED) is one of the more
mundane aspects of Lean Manufacturing and is often ignored. This leads to the creation of
several vicious circles in the manufacturing system as illustrated.
Risk & Difficulty Loop
When we run large lots of each product, setups on that product are infrequent. Setups take
skill, practice and coaching, much like golf. When operators perform setups infrequently they do
not learn them well.
This leads to the perception that setups are difficult and risky. (You never know how long it
will take or whether the product will be right). The perceptions of risk and difficulty
encourage large lots and thus fewer setups.
Piece Cost Loop
With large lots, a fixed setup cost is amortized over a large number of units. This seems to
reduce the unit cost. There are offsetting costs associated with the resulting inventories, but
these offsetting costs are usually buried in the overhead. This also encourages large lots or
The consequence is high inventory and complex scheduling. These give rise to a plethora costs
and negative consequences. The black hole of overhead sucks in most of the costs. Other
penalties such as erratic deliveries are far removed from the fundamental cause and it is
difficult to link cause and effect. Limiting mechanisms prevent lot sizes from going to infinity
but these are often weak.
The leverage point in this system is in the risk perception loop. If we can make setups fast,
easy and predictable the loop reverses into a "virtuous cycle". Easy setups encourage small lots
and small lots mean more setups which increases confidence and setup skill. In addition, the
piece cost loop becomes very weak.
As a result, inventory comes down and scheduling is easier, The flow of costs into the Black
Hole slows as people spend less time expediting, searching and chasing.
Setup reduction (SMED) ties in with many other reinforcing loops in a
Lean Manufacturing System. When the loop reverses
and lot sizes come down, it allows the use of Kanban and other simple scheduling methods.
Kanban introduces other loops (not shown) that further reinforce the reduction in lot sizes.
Workcells are most effective with small lots and setup reduction makes cells feasible or helps
them perform better. Kanban also fits well in many workcells.