http://www.yycadvisors.com/licensing-requirements-for-doing-business-in-malaysia.html

Licensing Requirements for Doing
Business in Malaysia

1. BUSINESS PREMISE LICENSES AND SIGNBOARD LICENSES

Companies doing business in Malaysia are required to apply for business premise licenses and signboard licenses from the respective State Authorities. The requirements for the application of a business premise license and a signboard license may vary according to each local authority. Generally, an application for a business license and signboard license must be accompanied by:

(i) Photocopy of the applicant's identity card

(ii) Passport-sized photograph of the applicant

(iii) Copy of the company's M&A and Forms 9, 24 and 49

(iv) Copy of either the rental agreement or the sale and purchase agreement of the company's business premise

(v) Copy of the Certificate of Fitness of the company's business premise

(vi) Copy of the Fire Department's support letter

(vii) Copy of the location plan of the company's business premise

(viii) Photographs of the business premise

(ix) Photographs showing the location of the company's signboard

(x) Samples of the signboard indicating its design and colors

For further information for companies located in Kuala Lumpur, kindly visit DBKL's website at www.dbkl.gov.my
For further information for companies located in Petaling Jaya, kindly visit MPPJ's website at www.mbpj.gov.my


2. SPECIAL LICENSES

In addition companies doing the following businesses are also required to obtain special licenses:

i) Manufacturing

Manufacturing companies which employ at least 75 full-time employees are required to apply for manufacturing license from MIDA.

For further details please visit MIDA's website at http://www.mida.gov.my

ii) Banking

Under the Banking and Financial Institutions Act, 1989, the Malaysian Central Bank licenses and regulates businesses such as banking, money broking, discount houses, provision of credit and finance, merchant banking, deposit taking and certain other financial businesses.

For further details, please visit Bank Negara's website atwww.bnm.gov.my.

iii) Building and Construction

All Companies in this field must obtain a licence from the Construction Industry Development Board (CIDB) prior to incorporating in Malaysia and before undertaking any construction and related activities in the country.

For further details, please visit CIDB's website at www.cidb.gov.my

iv) Oil and gas industry

When incorporating in Malaysia, companies which wish to explore and develop upstream oil and gas reserves in Malaysia are required to sign a production sharing agreement with Malaysian state Oil Company Petronas.

For further details, please visit Petronas website atwww.petronas.com.my

v) Wholesale and Retail Trade

When incorporating in Malaysia, note that all proposals for foreign involvement in wholesale and retail trade must obtain the approval of the Committee on Wholesale and Retail Trade (CWRT).

There is no restriction on maximum shareholding i.e. foreigners can own 100% of a company. If they own more than 30% of any company, they will be required to apply for Foreign Investment Committee approval, the process of which takes more than 6 months but approval is normally given. Normally, small businesses will not apply for any FIC approval unless there is business with the government departments.

Wholesale and Retail Trade (WRT) license is required by all companies that are in the wholesale, retail, trading, import/export and restaurant business which have foreign shareholding. The WRT license is required by all the said business sectors before they can apply for a professional work permit.

The Companies with foreign ownership that are engaged in distributive trade are required to obtain a wholesale and retail trade (WRT) license from the Malaysian Ministry of Domestic Trade and Consumer Affairs (MDTCA) [KEMENTERIAN PERDAGANGAN DALAM NEGERI DAN HAL EHWAL PENGGUNA (KPHDN)]. For WRT, the minimum paid up capital requirement is RM 1 million. Other companies with foreign ownership that are not engaged in distributive trade do not require a WRT license.

For further information, kindly visit KPHDN's website atwww.kpdnkk.gov.my

3. FOREIGN INVESTMENT COMMITTEE APPROVAL

Foreign investors may have to obtain the approval from the FIC for the following:

• any proposed acquisition by foreign interests of any substantial fixed assets in Malaysia
• any proposed acquisition of assets or any interests, mergers and take-overs of companies and businesses in Malaysia by any means, which will result in ownership or control passing to foreign interests
• any proposed acquisition of 15% or more of the voting power by any one foreign interest or associated group or by foreign interest in the aggregate of 30% or more of the voting power of a Malaysian company and business
• control of Malaysian companies and businesses through any form of joint-venture agreement, management agreement and technical assistance or other arrangements
• any mergers and take-over of any company and business in Malaysia whether by Malaysian or foreign interests
• any other proposed acquisition of assets or interests exceeding RM10 million in value whether by Malaysian or foreign interests (the threshold was revised to RM10 million with effect from 21 May 2003)
• Any acquisition by Malaysian interests of shares in Malaysian incorporated companies which constitutes more than 50% of the voting power of the company, i.e. where it gains statutory control.

Specific projects approved by the Government are exempted from the requirement of obtaining FIC's prior approval. Normally, small businesses will not apply for any FIC approval unless there is business with the government departments.

Determination Of Residence Status Of Companies

Public Ruling No. 5/2011
Date of Issue: 16 May 2011
http://www.ctim.org.my/cms/file/news/14/00693_Residence%20Status%20of%20Companies%20And%20Bodies%20of%20Persons%20PR5_2011%20(160511).pdf

Determination Of Residence Status Of Companies Or Bodies Of Persons
Companies and bodies of persons must meet certain criteria to be considered a
resident in Malaysia.

Section 8 of the ITA 1967 provides for the determination of
residence status in respect of companies and bodies of persons (except trust
bodies) whereas subsection 61(3) of the ITA 1967 provides for the determination of
residence status of a trust body.

5.1 Residence status of a Hindu Joint Family
Pursuant to paragraph 8(1)(a) of the ITA 1967, a Hindu Joint Family is
resident in Malaysia for the basis year for a year of assessment if the
manager or karta is resident for that basis year. As such, if the manager or
karta is a non-resident, the Hindu Joint Family is deemed a non-resident in
Malaysia.
5.2 Companies or bodies of persons carrying on a business
Pursuant to paragraph 8(1)(b) of the ITA 1967, a company or a body of
persons (not being a Hindu Joint Family) carrying on a trade or business is
resident in Malaysia for the basis year for a year of assessment if at any
time during the basis year the management and control (as explained in
paragraph 5.5 of this Ruling) of its business or of any one of its businesses
are exercised in Malaysia.

Example 1
Jet Ltd, a company incorporated in Hong Kong has businesses in Hong
Kong, Singapore and Malaysia. All the businesses of the company are
managed and controlled by the head office in Hong Kong except for a brief
period in the year 2008 when the management and control was exercised in
Malaysia. This is because one of the board of directors meeting was held in
Kuala Lumpur, where important policy decisions were made, on 28.6.2008
which falls in the basis year for the year of assessment 2008.

Jet Ltd is resident in Malaysia for the basis year for the year of assessment
2008 as the management and control which involved important policy
making decisions was exercised in Malaysia in 2008.
Income derived in Malaysia is subject to tax
Therefore the income derived from the business carried on in Malaysia is subject to tax in Malaysia
for the year of assessment 2008.
Note: If the company is not a resident in Malaysia, it would still be taxable
on its income derived from Malaysia. Non-resident companies and persons
other than resident companies carrying on the business of banking,
insurance or sea or air transport are exempted from tax on income derived
from sources outside Malaysia and received in Malaysia.

Example 2
Simon Inc., was incorporated in the USA on 2.1.2000 and shortly after its
incorporation, it registered as a foreign company in Malaysia on 2.3.2000.
Simon Inc. (Malaysia) then commenced the business of provision of
management and consultancy services in Malaysia. Its revenue was largely
from fees charged for management, consultancy and other services
provided to a related company, Simon (Malaysia) Sdn Bhd.
The Board of Directors of Simon Inc. (Malaysia) comprised of an American
citizen who held the post of the president and 4 Malaysians who held the
posts of a general manager, director (2 persons) and an accountant.
However, the management and control of Simon Inc. (Malaysia) has been
carried on in the USA since incorporation by the board of directors in the
USA.
The financial accounting period of Simon Inc. (Malaysia) is the calendar
year. The company claimed to be a resident in Malaysia in the year of
assessment 2008 as the board of directors meeting was held in Kuala
Lumpur on 30.11.2008. An audit finding indicated that a board of directors
meeting was not held on the said date but a promotional and marketing
session was held instead.
Since a board of directors meeting was not held in Malaysia on 30.11.2008,
the management and control of the company was not exercised in Malaysia
in the year of assessmen 2008. Therefore, Simon Inc. (Malaysia) is not a
resident in Malaysia for the year of assessment 2008.
5.3 Any other company or body of persons
INLAND REVENUE BOARD MALAYSIA
RESIDENCE STATUS OF COMPANIES
AND BODIES OF PERSONS
Public Ruling No. 5/2011
Date of Issue: 16 May 2011
Issue: A Page 10 of 15
Pursuant to paragraph 8(1)(c) of the ITA 1967, any other company or body
of persons (not being a Hindu Joint Family) is resident in Malaysia for the
basis year for a year of assessment if at any time during the basis year the
management and control (as explained in paragraph 5.5 of this Ruling) of its
affairs are exercised in Malaysia by its directors or other controlling
authority, e.g. a board of management / directors. As for investment holding
companies, the management and control of its affairs includes the
management and important decisions in respect of investments.
Example 3
Smart Holdings Sdn Bhd (SHSB), an investment holding company was
incorporated in Malaysia on 2.1.2006. SHSB is wholly owned by Smart
Holding Ltd, the holding company in the British Virgin Islands. This holding
company is wholly owned by Smart Construction Holding Ltd, the ultimate
holding company in Bermuda.
The board of directors of SHSB comprises of 7 directors, 5 of whom are
citizens and residents of Hong Kong while the remaining 2 are Malaysians.
The board of directors meetings are held in both Hong Kong and Malaysia.
The meetings that were held in Hong Kong were only attended by the 4
directors from Hong Kong who have vast experience in investment and
finance. Meetings were also held in Malaysia but were attended by the 2
Malaysian directors and communication with the directors from Hong Kong
were through video conferencing and telephone. From the minutes of the
meetings, it was noted that all decisions regarding investments, share
management, finance and administration of SHSB were resolved in Hong
Kong by the 4 directors in Hong Kong. The meetings held in Malaysia
merely reported what had been decided in Hong Kong.
SHSB does not have a business premise in Malaysia. Its dividend income
is from investments in an Australian company, Smart Co. Ltd in Sydney and
interest income is from fixed deposits in various countries. None of SHSB’s
income has been remitted to Malaysia. SHSB does not have a bank account
in Malaysia and all its income has been remitted to a bank account in Hong
Kong.
SHSB claimed to be a resident in Malaysia from the year of assessment
2006 onwards as the management and control of its affairs were exercised
in Malaysia by its directors.
Note: If SHSB is a tax resident of Malaysia, the dividend income from
Australia should be subject to tax at 15% on gross in accordance with Article
10 of the Avoidance of Double Taxation Agreement between Malaysia and
Australia instead of the 30% tax rate levied by the Australian Tax Authorities
based on the Australian domestic tax laws.
INLAND REVENUE BOARD MALAYSIA

Stop the "I know that" attitude

One who says "I know that" will have their unconscious mind shut down to new teaching.

Instead, one should change the 3 words to the 4 words "Thank you for sharing" so that his / her unconscious mind does not block out new teaching.

Story

Once upon a time, there was a young man who wants to seek wisdom from a wise "teacher". He started off by sharing what he knows and about his past successes. He shared and shared and continued on for a long time bragging about achievements.

The "teacher" interrupted him and asked if he can serve some tea. The "teacher" poured the tea from a teapot into the small tea cups until it overflows and still did not stop pouring until the young man yelled at him saying "The cup is already full, don't pour anymore". The teacher said to him "Young man, to learn more, one has to empty the cup first. Otherwise, the additional "tea" will just overflow and never be able to be deposited into the cup.

The young man realized his actions and told the "teacher", "Thank you for sharing".

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Tax on Rental Income

Income Tax Act 1967
http://www.kpmg.com.my/kpmg/publications/tax/22/a0053.htm


http://www.hasil.gov.my/pdf/pdfam/PR3_2011.pdf

INVESTMENT HOLDING COMPANY
PUBLIC RULING NO. 3/2011


http://www.hasil.gov.my/pdf/pdfam/PR4_2011.pdf


10.3 If there is a change in tax treatment of the letting of a real property
from a business source under paragraph 4(a) of the ITA
to a non-business source under paragraph 4(d) of the ITA
in the basis period for a year of assessment,
the person who lets out the real property has two sources of income
a)from the same real property in that basis period, i.e a business source under paragraph 4(a) of the ITA and
b)a non-business source under paragraph 4(d) of the ITA.

If as a result of the change:
10.3.1 a company becomes an investment holding company (IHC), the rental income (business source) would be assessed as income under paragraph 4(d) of the ITA. Therefore, the company is not entitled to claim for capital allowances on plant and machinery since they are not used for the purpose of a business at the end of the basis period for that year of assessment.
10.3.2 a company does not become an IHC, the company still derives rental income under paragraph 4(a) and 4(d) of the ITA in respect of the real property. Even though the company is not an IHC, the company would not be entitled to claim for capital allowances on plant and machinery since they are not used for the purpose of a business at the end of the basis period for that year of assessment. Note: The determination of whether a company is an IHC or not is explained in the Public Ruling No. 3/2011 (Investment Holding Company).

eXtensible Business Reporting Language (XBRL)

XBRL stands for eXtensible Business Reporting Language. It is an electronic communication of business and financial data language developed to present financial statement on the Internet. The key advantage of this new “language” is that an identifying tag is applied for each individual item of data instead of treating them as a block of text.

Since the financial data is now tagged, it thus can be recognized by the recipient party’s computer. Accountants, auditors, regulators and financial analysts are used for other purposes; and also presents variety of ways in a fraction of a second and eliminate the possibilities of human error during the re-keying of financial data. This will allow flexibility while enhancing transparency and timely dissemination of relevant financial information.

With the financial data tagged before publishing onto the Internet, it is the Directors’ responsibility to ensure correctness and accuracy of the financial statement in XBRL format.

Although Malaysia has not implemented XBRL at this moment, there is a reasonable expectation that Suruhanjaya Syarikat Malaysia (SSM) will implement this in the near future. This expectation can be seen from the growing use of XBRL in the global environment, including our neighbouring country, Singapore. Other countries in Asia Pacific that are adopting XBRL formats are Japan, Korea, Australia and the Stock Exchanges of Thailand and China.

Singapore’s Accounting & Corporate Regulatory Authority (ACRA), which is the equivalent of Malaysia’s SSM, has already implemented XBRL formatting for Singapore companies incorporated on or after 1 November 2007.

7 Feb 2013 Graduation

Graduation date - 7 Feb 2013

Cost of hiring a graduate gown  - GBP51
This will incur an additional cost of: £ 20.00

OPTIONS Hire Buy Gown Hood Hat

SIZE DETAILS

Sex Male: Female: Unit of measurement:   m/cm  ft/ins  Height:   Please select    1.37m  1.40m  1.42m  1.45m  1.47m  1.50m  1.52m  1.55m  1.57m  1.60m  1.62m  1.65m  1.68m  1.70m  1.72m  1.75m  1.78m  1.80m  1.83m  1.85m  1.88m  1.90m  1.93m  1.95m  1.98m Head Circumference:   Please select    53  54  55  56  57  58  59  60  61  62  63  64  65  66  67  68  69 Chest Size: Up to 132 cm Over 132 cm FAQ Q. How much notice is required before I book my graduation outfit?  A. Please book early to be sure of your order as we cannot always guarantee an order if you leave your booking later than 21 days before your Ceremony (being the date agreed for the Hire outfit to be available). Please check the website to see if the ceremony date option is still available or contact the Call Centre to establish if it is still open to book.  Q. I'm not sure what degree I am on.  A. We are unable to tell you what you have been studying for, ask your course tutor or the university or college registry.  Q. What does 'Height' mean?  A. Your height means the measurement from the top of your head to the ground. This can be in metres or feet and inches.  Q. What does full outfit mean?  A. Full outfit means all the required items for the award that you are receiving and is usually a gown, hood and hat although this varies according to the institution.  Q. What does Extra Time mean?  A. The normal hire fee is usually for the ceremony day (or evening if it is just an evening ceremony). This enables you to wear the outfit for your graduation ceremony and have private and official photos taken if you want. If you opt for Extra 7 days hire you can take the robes away from where you had your graduation ceremony and keep them for one week, returning them to us in the postage paid bag provided. Instructions regarding the use of this bag are listed inside the bag. You must obtain proof of posting. You are not allowed to take your outfit out of the United Kingdom.  Q. Can I return my outfit to my nearest Ede and Ravenscroft store?  A. No, please return all postal items as requested to the address as stated in the back of your gown.  Q. Where do I collect my outfit from?  A. Your university or college has set aside a special area for you to collect your outfit and put it on. Details are normally given to you in your handout regarding ceremony arrangements. Confirm with your registry.  Q. Can I collect my purchased accessories with my hire outfit?  A. No, hire orders will be delivered direct to your graduation ceremony. All purchased orders will be delivered to your specified delivery address (not your institution).  Q. When can I collect my outfit?  A. Details of where and when will be supplied to you in due course by your university or college, however as a general rule Ede and Ravenscroft will normally be available to robe you at least two hours before your ceremony.  Q. How will I know how to wear the outfit?  A. We will help you put it on and ensure you are wearing it correctly.  Q. What can I do if I am too late to order my outfit on-line?  A. You may be able to place a late order. Go to the enquiry desk in the robing area early on the day of your ceremony and our staff will do their best to help you. We are usually only able to accept cash or cheques at the ceremony. Please note we cannot guarantee we will be able to provide robes for late orders.  Q. How can I confirm that my order has been placed?  A. You can see if your order has been placed by accessing the Review / Amend order screen which can be entered from the home page drop down menu.  Q. I am unable to print my confirmation e-mail - can I collect my gown without it?  A. It is not imperative that you have the printed copy, but take a note of the number - which can be found on the Review / Amend order screen, as it does speed things up at the ceremony, in any event, our representatives will have detailed lists on the day of your ceremony.  Q. When will my outfit arrive?  A. This will depend on the type of outfit you have ordered. The dispatch time will be stated on your shopping basket when placing your order on the internet. Please make a note of this.  Q. What forms of payment do you accept?  A. Credit Cards: Visa, Master card      Debit cards: Visa debit, Maestro      We also accept Electron cards.  Q. Can I go into my nearest store to place my order in person?  A. No. All orders should be processed via the website or the Call Centre.  Q. Can I go into my nearest store to have my measurements taken for my outfit?  A. No, limited space and press of business makes this impractical.  Before contacting us please try Frequently Asked Questions - your question may be answered there.  For general enquiries:  E-mail student@edeandravenscroft.com or telephone 01223 861 854 (national rate)

How to calculate your return on investment

http://www.fatpitchfinancials.com/392/how-to-calculate-your-return-on-investment/

How to calculate your return on investment

Thursday, September 21st, 2006 | Stock Tools with 65 Comments

Determining your return on investment is a very important part of any investment review. Whether you’re investing in savings accounts, stocks, real estate, capital upgrades, or new business ventures, estimating a return on investment will aid you in choosing among investment options.
I don’t simply calculate a straight return on investment. I prefer determining anannualized rate of return that takes into consideration the timing of investments and return, as well as compounding. Most of you are probably familiar with this concept through the term Annual Percentage Yield (APY),compound annual growth rate (CAGR), or internal rate of return (IRR). Let me walk you through the steps on how you can calculate your return on investment in terms of APY:

Step 1.  Calculate all the costs associated with an investment.
Ask yourself the following questions about the investment:

• What are the initial upfront costs associated with the investment?
• What are the maintenance costs?
• Are there any fees or taxes associated with the investment?
• What kind of research costs will you incur to properly evaluate (i.e., due diligence) the investment?
• How much of your time will this investment consume? Your time is valuable, so a complicated project could have real opportunity costs.

Basically, don’t forget the hidden costs often associated with investments.  Be sure to list out all costs you can think of.
Step 2. Estimate or calculate your returns.

• How much do you expect to gain from the investment?
• When do you expect returns to happen? 

Determine how much you expect to gain from the investment.  Detail specifically all the individual returns you expect to receive from the investment.
Since returns from investments are often uncertain, you might also want to jot down what you think the probability of each return occurring when you thought they would. Be sure to also specify when these returns will occur and for how long. This will be important for the next step.
Step 3. Establish a timeline for costs and returns.
Draw a simple timeline or just list in chronological order all the costs and returns you discovered in steps 1 and 2. Costs should be listed as negative dollars and returns as positive dollars.
For example:

• 1/1/2006 Initial investment cost: - $100,000
• 9/21/2006 Sell investment: $120,000

Step 4. Calculate annualized return of investment or APY.
This is the meat of the process and the most challenging step of calculating the return on an investment. Let me explain it using a simple example that we started above.
Let’s assume you made an investment on January 1, 2006.  That investment cost you $100,000 including fees. Today, September 21, 2006, you decide to sell that investment and you receive $120,000 after all expenses.
Now we want to find the APY of this investment so we can compare it to other investments or even your savings account rate.  In finance, this is often called calculating your internal rate of return.  Technically this process involves determining a discount rate at which the present value of a series of investments is equal to the present value of the returns on those investments. (Ah, this brings back memories of economics in graduate school.) Thankfully, you don’t have to fully understand the process of how this is calculated in order to use it.
For a simple situation like the example above:

APY or IRR = (Final return/Initial investment)^(365/days) – 1

In English, this means that APY equals the final dollar amount divided by the initial investment (positive number for this equation) raised to 365 divided by the number of days the investment took to complete. Then you subtract one from the number you just calculated and multiple by 100 to get your percent APY.
Too bad most investments are not this simple. You often have to pay additional capital in throughout the investment project (e.g., quarterly taxes) and your returns often come in periodically (e.g., monthly) and often with a final lump sum payout (e.g., you sell your investment to someone and get paid).
Modern spreadsheet software includes a great function to automagically find the internal rate of return (IRR), which is the same as APY.  Microsoft Excel (MSFT), Open Office (SUN), and Google Spreadsheets (GOOG) include the flexible XIRRfunction that can take a list of investments and returns and the corresponding dates of those events and calculate the APY for that investment.  This is a powerful and very useful function that I recommend everyone learn how to use and understand. The XIRR function is very flexible. You can you it for very simple investments like the example above or much more complex situations that include payments that occur regularly or even irregularly.
Let me show you a two examples:
Example #1 – Monthly returns

 Example #2 – Yearly returns

View the examples using Google Spreadsheets.
View the examples using Excel spreadsheet: Annualized rate of return.xls. This spreadsheet includes the simple example from earlier in the post as well.
Notice how the return in Example #1 is much higher than that of Example #2 even though the payment amounts and total profit are the same.  The key difference is the timing of the payments.  Because the returns in Example #1 come monthly, the annualized rate of return or APY is much higher.  In Example #2, profit dividends only come in annually. That dramatically reduces the APY. I like using annualized rates of return because they account for the time value of money.
That’s it! Now you know how to properly measure your return on investments. Compare the different annualized rates of returns for your various investment options and then you can select those with the highest rates of return (assuming risk is equal among the alternatives). You can also determine your “real” return by subtracting out the average rate of inflation from the annualized rate of return. This way you can determine if you are actually building wealth with your investments.

http://thestar.com.my/news/story.asp?file=/2012/10/24/nation/20121024071744&sec=nation

Wednesday October 24, 2012

World Bank report shows Malaysia ranked 12th most business-friendly country

By RAZAK AHMAD
razak@thestar.com.my

http://thestar.com.my/news/story.asp?file=/2012/10/24/nation/20121024071901&sec=nation

Wednesday October 24, 2012

Malaysia now aims to be top 10 in World Bank ranking

PETALING JAYA: Malaysia is aiming to be among the top 10 most business- friendly economies globally after coming in 12th in the World Bank ranking.

The Wanted - Glad You Came lyrics

Glad You Came lyrics

The sun goes down
The stars come out
And all that counts
Is here and now
My universe will never be the same
I'm glad you came

You cast a spell on me, spell on me
You hit me like the sky fell on me, fell on me
And I decided you look well on me, well on me
So let's go somewhere no one else can see, you and me

Turn the lights out now
Now I'll take you by the hand
Hand you another drink
Drink it if you can
Can you spend a little time,
Time is slipping away,
Away from us so stay,
Stay with me I can make,
Make you glad you came

The sun goes down
The stars come out
And all that counts
Is here and now
My universe will never be the same
I'm glad you came
I'm glad you came

You cast a spell on me, spell on me
You hit me like the sky fell on me, fell on me

And I decided you look well on me, well on me
So let's go somewhere no one else can see, you and me

Turn the lights out now
Now I'll take you by the hand
Hand you another drink
Drink it if you can
Can you spend a little time,
Time is slipping away,
Away from us so stay,
Stay with me I can make,
Make you glad you came

The sun goes down
The stars come out
And all that counts
Is here and now
My universe will never be the same
I'm glad you came
I'm glad you came

I'm glad you came
So glad you came
I'm glad you came
I'm glad you came

The sun goes down
The stars come out
And all that counts
Is here and now
My universe will never be the same
I'm glad you came
I'm glad you came

http://en.wikipedia.org/wiki/5S_(methodology)

5S (methodology)

From Wikipedia, the free encyclopedia

This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed.(May 2011)

Tools drawer at a 5S working place

5S is the name of a workplace organization method that uses a list of five Japanese words:seiri, seiton, seiso, seiketsu, and shitsuke. Transliterated or translated into English, they all start with the letter "S". The list describes how to organize a work space for efficiency and effectiveness by identifying and storing the items used, maintaining the area and items, and sustaining the new order. The decision-making process usually comes from a dialogue about standardization, which builds understanding among employees of how they should do the work.

Contents   [hide]  1 The 5 S's 1.1 Sorting 1.2 Straightening or Setting in Order 1.3 Sweeping or Shining 1.4 Standardizing 1.5 Sustaining the Practice 2 Additional S's 2.1 Safety 2.2 Security 2.3 Satisfaction 3 The Origins of 5S 4 The Objectives of 5S 5 The Evolution of 5S 6 See also 7 References

[edit]The 5 S's

There are five primary 5S phases: sorting, straightening, systematic cleaning, standardizing, and sustaining.

[edit]Sorting

Eliminate all unnecessary tools, parts, and instructions. Go through all tools, materials, and so forth in the plant and work area. Keep only essential items and eliminate what is not required, prioritizing things per requirements and keeping them in easily-accessible places. Everything else is stored or discarded.

[edit]Straightening or Setting in Order

Arranging tools, parts, and instructions in such a way that the most frequently used items are the easiest and quickest to locate. The purpose of this step is to eliminate time wasted in obtaining the necessary items for an operation.

[edit]Sweeping or Shining

Standardized cleaning-point at a 5S organized plant

Clean the workspace and all equipment, and keep it clean, tidy and organized. At the end of each shift, clean the work area and be sure everything is restored to its place. This makes it easy to know what goes where and ensures that everything is where it belongs.

[edit]Standardizing

All work stations for a particular job should be identical. All employees doing the same job should be able to work in any station with the same tools that are in the same location in every station. Everyone should know exactly what his or her responsibilities are for adhering to the first 3 S's.

[edit]Sustaining the Practice

Maintain and review standards. Once the previous 4 S's have been established, they become the new way to operate. Maintain focus on this new way and do not allow a gradual decline back to the old ways. While thinking about the new way, also be thinking about yet better ways. When an issue arises such as a suggested improvement, a new way of working, a new tool or a new output requirement, review the first 4 S's and make changes as appropriate. It should be made as a habit and be continually improved.

[edit]Additional S's

Three other phases are sometimes included: safety, security, and satisfaction.

[edit]Safety

A sixth phase, "Safety", is sometimes added.^[1] There is debate over whether including this sixth "S" promotes safety by stating this value explicitly, or if a comprehensive safety program is undermined when it is relegated to a single item in an efficiency-focused business methodology.

[edit]Security

A seventh phase, "Security", can also be added.^{[citation needed]} To leverage security as an investment rather than an expense, the seventh "S" identifies and addresses risks to key business categories including fixed assets (PP&E), material, human capital, brand equity, intellectual property, information technology, assets-in-transit and the extended supply chain.

[edit]Satisfaction

An eighth phase, "Satisfaction", can be included.^{[citation needed]} Employee Satisfaction and engagement in continuous improvement activities ensures the improvements will be sustained and improved upon. The Eighth waste – Non Utilized Intellect, Talent, and Resources can be the most damaging waste of all.

It is important to have continuous education about maintaining standards.^{[citation needed]} When there are changes that affect the 5S program such as new equipment, new products or new work rules, it is essential to make changes in the standards and provide training. Companies embracing 5S often use posters and signs as a way of educating employees and maintaining standards.

[edit]The Origins of 5S

5S was developed in Japan. It was first heard of as one of the techniques that enabled what was then termed 'Just in TimeManufacturing'. The Massachusetts Institute of Technology's 5-year study into the future of the automobile in the late 1980s^[2] identified that the term was inappropriate since the Japanese success was built upon far more than components arriving only at the time of requirement. John Krafcik, a researcher on the project, ascribed Lean to the collective techniques being used in Japanese automobile manufacturing; it reflected the focus on waste in all its forms that was central to the Japanese approach. Minimised inventory was only one aspect of performance levels in companies such as Toyota^[3] and in itself only arose from progress in fields such as quality assurance and Andon boards to highlight problems for immediate action.

5S was developed by Hiroyuki Hirano within his overall approach to production systems.^[4] Many Western managers coming across the approach for the first time found the experience one of enlightenment. They had perhaps always known the role of housekeeping within optimised manufacturing performance and had always known the elements of best practice. However, Hirano provided a structure for improvement programs. He pointed out a series of identifiable steps, each building on its predecessor. Western managers, for example, had always recognised the need to decide upon locations for materials and tools and upon the flow of work through a work area; central to this (but perhaps implicit) is the principle that items not essential to the process should be removed – stored elsewhere or eliminated completely. By differentiating between Seiri and Seiton, Hirano made the distinction explicit. He taught his audience that any effort to consider layout and flow before the removal of the unnecessary items was likely to lead to a sub-optimal solution.

Equally the Seiso, or cleanliness, phase is a distinct element of the change program that can transform a process area. Hirano's view is that the definition of a cleaning methodology (Seiso) is a discrete activity, not to be confused with the organisation of the workplace, and this helps to structure any improvement program. It has to be recognised, however, that there is inevitably an overlap between Seiton and Seiso. Western managers understood that the opportunities for various cleanliness methodologies vary with the layout and storage mechanisms adopted. However, breaking down the improvement activity in this way clarifies that the requirements for the cleanliness regime must be understood as a factor in the design aspect of Seiton. As noted by John Bicheno,^[5] Toyota's adoption of the Hirano approach, is '4S', with Seiton and Seiso combined – presumably for this very reason. The improvement team must avoid the trap of designing the work area and then considering the cleanliness or tidiness mechanism.

Hirano also reminded the world of the Hawthorne effect. We can all introduce change and while people in the business consider the change program to be under management focus the benefits of the change will continue, but when this focus has moved (as is inevitably the case) performance once more slips. Western managers, in particular, may have benefited from the distinction between the procedural or mechanical elements, Seiketsu, of keeping these matters in focus and the culture change, Shitsuke, which is a distinct approach to bringing about a new way of working. A number of publications on the subject in the West have questioned whether this culture can really be tackled as part of an exercise of relatively limited scope.^[6] The broader kaizen, or continuous improvement, approach is built, among other things, upon the company's valuation of all members of the workforce. If employees don't feel valued within the overall company culture, perhaps the change required falls outside the limits of a housekeeping improvement program.

[edit]The Objectives of 5S

This section does not cite anyreferences or sources. (July 2012)

Hirano identified a range of benefits from improved housekeeping, all of which can be regarded as falling within the Lean portfolio – that is, they are all based around the elimination of waste in one form or another.

The most obvious benefit from items being organized in such a way (i.e. that they are always readily available) is that of improved productivity. Production workers being diverted from production to look for tools, gauges, production paperwork, fasteners, and so on is the most frustrating form of lost time in any plant. A key aspect of Hirano's organisation approach is that the often-needed items are stored in the most accessible location and correct adoption of the standardisation approach means that they are returned to the correct location after use. Another element of Hirano's improved housekeeping is improved plant maintenance – workers 'owning' a piece of plant, responsible for keeping it clean and tidy, can take ownership for highlighting potential problems before they have an impact on performance. (Of course, this brings with it the interface with preventive maintenance and the need for clarity in the 'assignment map', that is – who does what. The division of tasks between production workers and specialist maintenance engineers varies with the nature of the business, but ownership rests within the business unit rather than within the 'service provider'.)

The next aim is Quality. The degree of impact of dirt in a manufacturing environment, obviously, varies with the nature of the product and its process but there are few, if any, areas where dirt is welcome. Even if it is only in the form of soiled documentation accompanying the goods to the customer this can send a very negative message about the company and its culture. In other cases dirt can have a serious impact on product performance – either directly or indirectly, perhaps through compromising the integrity of test processes. Of course, 5S does more than address dirt; an inappropriate layout can result, for example, in product damaged through excessive movement or through the use of tooling other than that defined as the standard. Standardisation is a theme of Hirano's approach, overlapping to a considerable extent with, for example, that of Ohno. A Standard Operating Procedure for tool certification is much easier to achieve if the tool to be certified is always in a clearly-marked location.

Another goal is improved Health & Safety. Clear pathways between workbenches and storage racks can minimise accidents, as can properly-swept floors. As with Quality, a well-organised, clean and tidy facility lends itself more readily to standard practice. Hirano also described how an environment in which the workforce has pride in their workplace can contribute to a considerable extent in a number of ways including customer service. Improving the layout of the facility merges with the concept of visual management; if workers can see the status of plant and of work in the facility, thus removing the need for complex tracking and communication systems, then benefits will accrue. 5S can also be a valuable sales tool when potential customers visit; a well-organised, clean and tidy facility sends a message of a professional and well-organised supplier.

One point made by all practitioners is that the adoption of 5S must be driven by goals. An article in the journal of the UK's Institute of Operations Management written by Mark Eaton and Keith Carpenter of the Engineering Employers' Federation noted that "the successful implementation of 5S requires that everyone understand why it is being used and what the expected results are. As with all Lean techniques the aim is improvement in business performance; the adoption is not an end in itself..

[edit]The Evolution of 5S

This section does not cite anyreferences or sources. (May 2011)

Many Western companies now promote Hirano's approach with a sixth 'S' added for Quality. Not unnaturally, there is some debate over this, with devotees on both sides of the argument. The sixth S serves a fundamental purpose – it reminds everyone of the need for Quality. A key lesson taught by Japanese automobile manufacturers, and one central to the Toyota Production System, is that traditional levels of performance must be not only exceeded, but replaced by a completely different perception of the scale of what is acceptable. Rather than managing defects in percentage terms, Western managers heard of management in 'parts per millions', with single-figure levels of defects being the goal. Given that a 1% failure rate equates to 10,000 ppm the scale of improvement to be sought as part of the adoption of Lean was, to say the least, spectacular.

This improvement in quality levels could, of course, only be achieved with a complete re-definition of processes and culture within Western manufacturing. This includes issues such as 'Design for Manufacturing' and the fundamental change from Quality Control to Quality Assurance (that is, the Quality department role moving from inspecting and highlighting problems to guaranteeing methods and procedures to eliminate errors). Housekeeping, of course, is central to this and adding a sixth 'S' highlights this.

The contrasting view, and the one taken by Hirano in establishing this approach, is that each and every 'S' is a phase. As noted earlier, a major lesson for Westerners was Hirano's 5S methodology breaking the program down into a series of steps. The sixth 'S' does not add to this; Quality is not a phase, it is an objective – along with productivity and the others described above. Moreover, it is an objective of each and every phase. Adding the sixth 'S' might be perceived as recommending a program carrying out the sorting out, organising, cleanliness, procedural and cultural steps and subsequently building in Quality, which of course is not possible. If all the objectives have not been built in throughout each element of the definition of the new way of working then they can not be applied as an additional phase.

[edit]See also

• Kaizen

[edit]References

1. ^ "Lean and Environment Training Modules". United States Government, Green Supply Network. Retrieved 12 July 2012.
2. ^ Womack, James; Jones, Daniel; Roos, Daniel (1991). Machine That Changed The World. Productivity Press. ISBN 978-1-84737-055-6.
3. ^ Ohno, Taiichi Toyota Production System (TPS), ISBN 978-0915299140
4. ^ Hirano, Hiroyuki (1995). 5 Pillars of the Visual Workplace. Cambridge, MA: Productivity Press. ISBN 978-1-56327-047-5.
5. ^ The New Lean Toolbox, John Bicheno, ISBN 978-0-9541244-1-0
6. ^ 5S - The Housekeeping Approach Within Lean, Ian Henderson