Posts

Why Is It So Tough to Be Lean in a Relationship-centric Organization?

/in , /by

Relationship-centric organizations rely on personal networks and channels to get things done. These networks develop organically based on personalities, individual tendencies and the almost universal desire to avoid conflict.

In relationship-centric places, value streams flow along the path of least resistance. As processes are run, priorities are set and problems solved in a quid-pro-quo environment that attempts to minimize conflict. Here by definition, the optimal path is the one that causes the least friction. This always seeking-to-minimize-conflict to get things done is sometimes viewed as a strength. One will hear: “We’re great at problem-solving.” In reality, this approach is a hindrance for any business that wants to improve.

The Lean enterprise is process-centric. It seeks to understand process parameters first and then look objectively at performance. Here processes – not relationships – are meant to be optimized. People’s feelings, subjective by their very nature, are not a major part of the equation. Good performance and bad performance are simply metrics on a scale. In process-centric organizations, pointing out problems isn’t an attack on an individual or function, it’s an objective way to identify opportunities to improve.

It’s difficult to switch between the two. Relationship-centric organizations are conditioned to minimize problems that expose “my people”. Individuals gain status and their ability to perform by integrating into the network and getting along with others. Conflict isn’t constructive because it saps people’s energy and doesn’t really lead to solutions. The networks that enable work are not always obvious yet they tend to be stronger than any org chart. Changing to a new system that has a bias-for-process – something that transcends heroes and administrators – is a threat.

The status quo is strong. It’s aligned with human nature where avoiding conflict is a survival mechanism. It’s impossible to simply tell an organization to make the switch. This change is one of the hardest endeavors any organization ever pursues. It takes tremendous strength of leadership, patience, coaching and tactical implementation. But it’s doable and worth it – it’s just going to take more work, more time and greater discipline than you might initially think. In the change game, sustainability comes from endurance.

Notes:
> Relationship-centric organizations are particularly susceptible to high turnover. When key people leave, they take with them their piece of the puzzle – one that isn’t on a process map or org chart.

> Process-centric organizations honor mistakes and problems because they are easily plugged into a constructive problem-solving mechanism.

Want more content like this? Connect with us on LinkedIn

There are 9 Wastes in the Lean Waste Wheel

/in , , /by

When we think about improving operations and the Lean waste wheel, how many Lean wastes are there really? Correct Answer: At least 9.

This is in reference to the original 7 wastes in Taiichi Ohno described in his iconic waste wheel, shown below. It’s a question that comes up from time to time and one that Lean aficionados like to debate. Apparently there are tightly-held beliefs on this topic. I say, let’s not over complicate something that Ohno intended to be quite simple. But because waste is the red thread that runs through all of Lean, it’s worth consideration.

What we now know, is that there are actually 9 wastes in the Lean waste wheel. I know, I know – some who read this will be offended at first. So be it. I am confident that Taiichi Ohno would be open to this continuous improvement, even in the core of his philosophy. I also suspect he would be offended at the amount of waste generated debating the issue.

The Lean Waste Wheel – Traditional Version

The Lean Waste Wheel by Taiichi Ohno showing 7 wastes and 3 categories as described by Kaufman Global

Ohno’s Iconic waste wheel with the wastes spelled out and categorized – Kaufman Global’s preferred format.

Purists will tell you that there are 7 wastes as described by the sensei and there shall be only 7 wastes. Period. Another faction makes the argument for adding the “waste of people’s intellect” or something similar. This notion has become increasingly popular over the years. Kaufman Global added it long ago, but I’ve always found the classification a bit difficult. Is it intellect, human potential, creativity, insight, involvement, or what? Unlike Ohno’s original 7, these descriptors related to people’s energy seem too variable, too abstract and too difficult to attach to an action. More precision here would be helpful.

The case for waste of intellect arose from the observation that bosses and managers sometimes treat people like cogs instead of active participants in value creation. Ohno’s writings illustrate his own struggles to help us understand the important role of humans in all Lean equations. Who knows why he didn’t include something about people in his original wheel work? Maybe he considered himself an under-cover organizational engineer but felt most comfortable attending to hard assets (inventory and machines) and direct labor (the worker on the floor). Or maybe he didn’t want to too openly point out that management (aka Mr. Toyoda) was missing the point? Or maybe the culture he was dealing with valued the human element without having to spell it out – I doubt this, but it’s possible.

The Most Basic Element of All Waste is Time

With Lean, time is incorporated in many ways: cycle time, value added time, non-value added time, downtime, uptime, etc. Ohno simply broke it down in a way that made it easy to identify obvious targets to be addressed with appropriate techniques. Time is often thought of in terms of efficiency, but effectiveness – which is a way to describe the quality of a process – is a precursor of efficiency.

wasting time - A waste basket filled with clocks

Waste can be subdivided many ways. My take: It doesn’t really matter how many wastes you want to include.   If you think there are 20 different types of waste and this helps attack any one of them better; go for it – whatever works where you are. In the name of continuous improvement we must be willing to add or subtract in order to improve the system, right? Yes. Be careful though. We like to think categorically so more choices makes organizaing more difficult. And too many choices seems somehow less lean.

People Energy, Alignment and Engagement

Which brings us back to the concept of the waste of people’s intellect. When it comes to achieving operational excellence, a tremendous amount of time is lost by failing to engage people doing their daily work. Non-inclusion results in false starts, half measures, low sustainment and do-overs. Workshops and Kaizen Events may be common, but sustainable results are only achieved when people are tangibly connected to everyday improvement.

The Lean Waste Wheel with 9 Lean Wastes

The Lean Waste Wheel with 9 Lean Wastes

Alignment

Any attempt to be operationally excellent means real and sometimes uncomfortable change; which always meets resistance in some form. Alignment is about getting mostly everyone to support new ways of work. This is a cascading process where actions are different depending on ones place in the organization. If there was only one choice about what to align on however, it would be the need to engage people. The idea of defining people energy waste in specific terms, makes it easier to develop counter measures and a way of thinking about solving this problem that is similar to the other wastes in the wheel.

Engagement

Engagement means giving people a voice in the work they do and holding them accountable for improving things. Achieving broad engagement up and down the organization is tough for many. Kaufman Global uses structures like the Executive Steering Team, the Lean Daily Management System® (LDMS®), and Procedural Action Teams to create an environment that enables engagement. They’re simple enough to understand and do too. If methods are overly complicated, they are easier avoid.

When it comes to waste, everything revolves around time but it’s okay to define as many subdivisions as you like. If you had two to choose, I’d recommend lack of alignment and poor engagement as huge time wasters – possibly the most detrimental to any Lean system. When you get these right, smart people working together toward a common goal always solve the other problems.

**********

Notes:

  • Muda is the Japanese term for waste. This is the word Taiichi Ohno would have used.
  • A simple definition of waste is: Anything an all knowing, all seeing customer would not be willing to support (pay for).

If you want to learn more about Kaufman Global’s approach to engagement and alignment, check out SLIM-IT, Procedural Adherence and Lean Daily Management System. For a deep dive into the waste wheel and how it applies to Lean, check out our White Paper: Implementing Lean Manufacturing.

Procedural Adherence and Risk

/in , , /by

Procedural Adherence and process discipline are achievable – but only when they’re treated as behaviors instead of tasks.

**********

Procedural Adherence iconAlmost never do people violate procedures with bad intent. When it happens, it is enabled by a vague work culture coupled with urgent product and service demands. The effects of rules broken ripple through the organization with a range of negative consequences: personal safety, financial results, employee morale and public perception. Learn how to reduce procedural adherence problems and boost performance with behaviors that influence how employees view and deal with risk.

The enterprise works hard to define and defend organizational procedures to maximize speed, accuracy and return — and still, rules are routinely broken. Individuals and teams opt for apparent shortcuts that appear to speed things up, but instead delay progress, sink performance or worse: put people in harm’s way.

Could it be that employees are wired to break the rules? With certain cultural ques; yes.

People view and manage risk at a personal level. This sometimes results in actions that oppose the stated values of the enterprise which include adherence to procedures and rule-following. But there is a contradiction here. Instead of diligent procedural adherence, the enterprise is often more concerned with chasing (perceived) fast results and near-term profit at any cost.

The translation: The true value of the enterprise is that it is actually ok to break rules, especially when a customer-facing issue or revenue stream is in play. From the point of view of the individual faced with the pressure of “getting the job done” it’s simply less risky to violate some procedures to keep the machine moving. This fundamental misalignment of values is a breeding ground for mistakes and ultimate poor performance – including and perhaps especially, catastrophic events.

Achieving a state of better procedural adherence — that is, predictably getting employees to stick to predefined processes and standards — is a losing battle for many organizations. They desperately want people to follow the rules, yet their own culture drives decisions to the contrary. Why? Because everyone treats procedural adherence as a step in a process instead of a behavior motivated by perceived risk.

Many factors impact how employees comply with procedures: company culture, environmental complexities, the quality of existing support systems, and human nature. In this white paper, we’ll break down what drives employees to behave the way they do, so you can recast your organization as one where procedural adherence is the norm.

The Safety Paradox

A popular consensus is that it’s easiest for people to follow safety rules. While a narrow view, it’s useful to illustrate some truths about risk.

The basic reason we enjoy some measure of success with procedural adherence in safety matters is because unsafe behaviors are visible and may result in immediate consequence.

Safety rules tend to be easier to adopt because violations are more visible, and consequences are bad for both the individual and the enterprise.

But there is a more fundamental reason why. Accidents cause personal harm and enterprise disruption. In other words; failure to follow the safety rules can be bad for everyone. This alignment – a mutual understanding of risk – serves to induce a state of better procedural adherence with respect to safety matters.

Safety programs further reinforce these notions by stating that anyone can spot and audit unsafe behaviors and must do so as part of a “safety culture.” Unfortunately, easy-to-observe violations cause only a fraction of all incidents. By contrast, invisible missteps tend to stay buried deep inside complex procedures, only coming to light when something’s gone very wrong.

Given this insight, it’s all the more astounding to realize that, even where it’s clear that procedural non-compliance hurts everyone and rules are explicit, people will still make choices that put themselves and others in harm’s way. When this happens, it tells us a lot about the underlying values of the enterprise and how we all think about and deal with risk.

Two Modes of Thinking Affect Risk Behavior

A procedure is a complex chain of tasks and processes that are linked and sequenced to deliver a product or service to a customer. In that “value chain”, many hands touch and impact deliverables: individuals, functions, departments, service providers, suppliers, partners and so on. Each actor has visibility into their part of the chain, but rarely to the ins and outs of the entire system, nor the potential cascade of consequences that could arise from a misstep.

Mostly, people move through the day doing their job, responding to inputs, and reacting to issues as they arise. Occasionally, there’s a need to divert attention to a more complex problem, but mostly it’s about turning the crank. Immediate surroundings and cultural norms — “the environment” — drive much of their behavior.

Does “get the job done” trump “do the job right” in your organization?

The pressure to perform follows a few main themes: Keep things moving, be efficient, manage costs and assure good quality. No matter what anyone says, or how many DO THE JOB RIGHT posters hang on the walls, job pressure doesn’t necessarily include following the rules. The status quo barks out: Get the job done. In such an environment, going with the flow is perceived as less risky than monitoring and complying with all the procedural requirements. After all, we’re problem-solvers, right? A little rule-bending is expected and condoned.

Thinking Fast and Slow

For all of us, two distinct modes of thinking are constantly in play: fast and slow. Fast thinking is reactive, responsive and automatic. It looks for patterns, gets us through our day and requires little energy. When considering the equation: 2+2, you quickly conclude 4 as the only possible answer. That’s fast thinking.

Slow thinking, on the other hand, is just that: slow. It uses lots of energy because it requires focused attention. You’d need to employ slow thinking to multiply fractions, for instance, or to figure out how to avoid your least favorite relative at the family reunion.

As we fast-think through our day, we’re trying to avoid risk by paying attention to what people around us expect. This is human nature and not much of a conscious decision. Cutting some corners feels reasonable.

At the enterprise level, where policy is made and direction is set, the job IS slow thinking: planning new and better ways of doing things, improving results, satisfying customers and avoiding unpleasant surprises. All of those outcomes seem more likely when people follow the rules, so adhering to standard procedures is viewed as a way to lower risk.

Risk profile comparison table for the typical organization

Table 1 – In a traditional organization, following procedures can be viewed as having high or low risk, depending on one’s vantage point.

Table 1 contrasts these dynamics from the point of view of the individual vs. the enterprise. This misalignment between risk perceptions, plus the reactive nature of fast thinking patterns, are the reasons why your organization might be having a hard time achieving better procedural adherence. If rules are routinely broken where you are, it’s because no matter what anyone says, your organization’s true values are to get the job done — even if it means not following procedures.

A caveat: the foregoing assumes that tasks, processes and procedures are well defined, well documented and well understood — which is almost never the case. If you expect compliance but have not made the procedures clear, easily available and understandable, you’re fooling yourself and shortchanging your valuable workforce.

Procedural Adherence and Risk Defined

Given our understanding of how human nature drives or hinders procedural adherence, we can construct a simple definition. Procedural adherence is:

Aligned values and explicit behaviors that demonstrate the highest regard for following established standards to minimize risk.

If we break the definition down piece by piece, these points are important to understand:

  • When individuals and the enterprise share the same values, that alignment will translate to observable behaviors. As the saying goes, actions speak louder than words.
  • If you expect someone to follow the rules, then you’d better make those rules clear and understandable.
  • Adhering to procedures must become low-risk for everyone.

Our definition of procedural adherence goes well beyond the notion of false slogans and checklists to encourage compliance. It provides handles for people to grab ahold of. If we really want better procedural adherence, values must be aligned and why values were not aligned in the first place is the real root cause analysis that must be done.

Start by getting a grip on definitions, documentation and conveyance of the procedures that need to be followed. Focus on the ones that are most vital to the enterprise. Rationalize the list of critical expectations and then ACT on them. This requires active governance (that probably doesn’t currently exist) versus the typical haphazard, “Let’s do everything” approach.

Once you have a solid set of rational procedures that must be followed, react strongly when violations occur and dig for the cultural root cause when they do. You’ll often find the violators felt they were acting in accordance to their bosses’ objectives and in the best interest of the enterprise. Note: There is often a lot of bad precedent to be undone here.

While the conventional approaches to procedural adherence problems – Defining, Training and Discipline – have their place, they could be sabotaging your compliance efforts by looking like progress, but instead are just more of the same.

Targeting Behaviors for Lasting Improvements

We now know your enterprise and the individuals inside it at many times think differently. People on the ground think fast and avoid personal risk by occasionally breaking rules — and if the organizational culture says it’s ok to do it sometimes, it’s ok to do it any time. Conversely, the “think slow” enterprise seeks to minimize risk by getting everyone to follow the rules.

The key is to align the risk profiles for both. It’s the only path that works because it operates at the behavioral level. This requires a direct frontal attack on the status quo — an uncomfortable proposition for most, but one that must be done if real change is desired. After all, we’re talking about replacing poor habits (behaviors) with good ones. This is a goal that can only be accomplished with an approach that is: (a) highly visible, (b) effective in its execution, and (c) simple enough for everyone to understand.

Functional Steering Committee structure

Figure 2 – A high performing FSC provides the organization a leading indicator of procedural adherence.

Our solution — which many high-performance organizations have successfully adopted — is an engaged and visible coalition of leaders whose implicit and explicit objective is to reinforce a set of values with which everyone can align. We call this body the Functional Steering Committee (FSC). FSC participants are directors and functional heads tasked with managing major process nodes along the value chain. They meet weekly and review procedural adherence status by asking three questions:

  1. Do we have the procedure?
  2. Do we understand the procedure?
  3. Are we doing the procedure?

Why meet weekly? In our experience, a weekly cadence is vital. If less, participants lose interest and urgency. Monthly sessions result in a last-minute rush to gloss over subpar progress and shoddy work. This is the very behavior that better procedural adherence is designed to attack. But by tackling issues weekly, communicating expectations, asking the right questions and demonstrating the benefits of procedural adherence, the risk alignment profiles noted in Table 2 become the new status quo.

Risk profile alignment table for high performing organizations

Table 2 – When the risk profiles are the same for the enterprise as the individual, everyone is motivated to act in the same way because the cultural norm is to follow procedures.

The chartered and structured FSC is a new behavior. It’s highly visible and is a leading indicator of better procedural adherence. Over time, the enterprise and individual employees begin valuing the same things, and decisions become more aligned, consistent and mutually beneficial. And, FSC benefits don’t stop here.

The FSC governs the technical aspects of improvement too, pinpointing gaps that might otherwise go unnoticed. For example, if someone does not have a documented procedure, who better to help than the FSC? If there is confusion about how a procedure is supposed to work, the FSC intervenes. If someone isn’t following the rules, the team will find out why and encourage / remove barriers to doing so in real time. The FSC can surface innovations that can then be built into the formal, standard approach.

With respect to procedural adherence, often this governance role is not being done well, or at all. This is a gap that needs to be closed. Yet the usual objections will be heard: “Do we really need another meeting?” and “Can’t we automate this?” Some will suggest that technology is a better answer, or another meeting is too much. Technology can help, especially in the area of standard templates and sharing best practices. Remember, however, that you’re dealing with a behavioral issue. If “just another meeting” seems like too much, eliminate three useless ones or have the FSC integrate the responsibilities of the team that’s investigating the most recent catastrophe.

When it comes to procedural adherence and risk, one of the biggest problems your organization will face is getting functions and departments to come together to solve system-level problems like procedural adherence. The solutions to these types of problems: efficiency, effectiveness, productivity, quality and customer-focus are solved using Lean and other process improvement techniques. The first step is gap identification, and this new approach with the FSC is ready-made for that.

A New Destination Requires a New Path

Einstein famously defined insanity as doing the same thing over and over while expecting different results. You’ve likely heard that proverb a dozen times, nodded in agreement, and returned to old practices expecting new outcomes.

Likewise, returning to traditional approaches where procedures are treated like guidelines instead of values-driven standards will result in the level of compliance in your organization remaining unchanged… or inconsistent, at best.

It won’t be easy. Old ways die hard. Your organization will face tough decisions about chasing revenue, be tempted by the notion that a small defect or minor violation won’t matter, and that speed trumps standards. These moments of truth happen every day, swaying people to compromise and make poor choices.

The payoff for doing something truly different, however, is huge. Imagine a 20% reduction in catastrophic events and the benefits when this 20% is spread across all types of incidents. Imagine a team of leaders working across functions, better understanding each other’s needs, and monitoring hand-offs between them. Finally, consider the relief, shot of confidence and productivity for front line workers who know the rules, and no longer feel the pressure to disregard them – instead, operating in an environment that demonstrably values them.

 

This post is an excerpt from Kaufman Global’s White Paper: Procedural Adherence and Risk. To acquire a copy of the full white paper, click here.

If you’d like to learn more about the services we offer related to addressing Procedural Adherence challenges, click here.

Implementing Lean Manufacturing: Part 1 of 3

/in , /by

Introduction

Kaizen Japanese symbol

Kaizen is a Japanese word that means “small, ongoing good” (kai) and “good, little, for the better” (zen). The term has come to mean small, continuous improvements by hands-on workers all the time.

Lean manufacturing has become synonymous with world-class operational excellence. Under various names (synchronous, pull, demand flow, flexible, cellular, just-in-time, one-by-one), Lean is the single most powerful strategy for improving a production operation’s competitiveness. The dominant players in every market segment are aggressively implementing Lean as a strategic weapon because they realize they have no choice. If they don’t “do Lean” and stay Lean, they will quickly fall behind the market leaders because they are less able to adapt to an ever-changing competitive environment.

This white paper is directed at organizations that are either eager Lean practitioners or those who have not yet had a Lean awakening. Both will find value in its explanation of the foundations and basic mechanics. Additionally, this paper describes Kaufman Global’s specific approach to Lean implementation and our learnings over years of working with clients. Our method is holistic and pragmatic, reduces implementation time, increases benefits and ensures sustainability. Kaufman Global has pioneered several techniques that are in wide use across a broad spectrum of industries and business today, including: the SLIM-IT® model for implementation, Lean Leadership®, the 20 Keys® and the Lean Daily Management System® (LDMS®).

A Definition of Lean Manufacturing

Lean manufacturing, or Lean, is an integrated leadership philosophy, management system and set of tactical methods / tools that focuses on creating an operation with minimal amounts of nonvalue-added activity, inventory (Raw, Finished and Work-In-Process) and errors. The primary engine for eliminating nonvalue-added elements in  Lean system is the employees who do the hands-on work.

The Benefits of Lean

While the mechanics and approaches of Lean may not be clear to everyone, there is little doubt concerning the magnitude of potential benefits. Years ago, in order to get people interested in the notion of Lean, it was necessary to quote double digit percentage savings from process improvement. Without making that list here, in our experience any process is capable of a 10 – 30% improvement if Lean is applied with some rigor. This is in any and all dimensions whether it be cycle time, lead time, quality, inventory, customer satisfaction, absenteeism, etc.

Results like this cannot be attained by chance or half-hearted, informal initiatives. They can only be generated through carefully planned and aggressively supported efforts that are overtly led by management. Isolated improvements have no chance of leading to an organization-wide transformation of day-to-day behaviors, expectations, metrics and the entire system of work.

The Evolution of Lean Manufacturing

Figure 1 is a conceptual diagram showing the progression of Lean between the 1940s and today. Lean would not have emerged as a structured system when it did (or at all, perhaps) if it had not been for two circumstances. The first was the condition of Japan after World War II. Totally devastated and with few resources, Japan could not compete with other industrialized economies on costs, volume or quality using standard mass production approaches. There wasn’t enough money to build modern factories or buy modern equipment. Japanese manufacturers had to “make do” with what they had; and they had very little. This massive handicap created the ideal conditions for the true catalyst of Lean to operate.

This second circumstance was the pioneering thinking of Kiichiro Toyoda, Taiichi Ohno, and Shigeo Shingo. Their focus on low-tech, pull systems and the elimination of waste evolved into the Toyota Production System (TPS) over the period from 1945 to about 1975 (the original, Toyoda, was changed to Toyota for American consumers). The 1990 book, The Machine That Changed the World by James Womack, et al, popularized the term Lean manufacturing to refer to the TPS and its derivatives. Other generic names for the TPS are flexible, cellular, one-by-one, pull, synchronous, demand-flow and World-Class manufacturing. Also used are just-in-time and kaizen although both are only elements of the TPS, not the entire system.

Starting in the mid-1980s, the large automobile manufacturers adopted many of the basic principles of the TPS, but each changed the name to something that sounded more “home grown” to their employees, customers and shareholders. Other companies have since taken the same approach. Thus, it is common to find that Company X has the “X Production System” in place. Peel back these “labels,” and you find significant elements of the TPS underneath.

During the 1990s, it became apparent that there was plenty of room for Lean application far flung from automotive assembly and well beyond the factory floor. This started the integration of methods and techniques that is still going on today – Office Kaizen is one example. As organizations from all industries, sectors and segments embraced adaptations of the TPS, new tools and methods were developed and Lean continued to evolve.

In the mid-2000s, the term operational excellence or “OpEx” started becoming the popular catch-all phrase for operational improvement of any kind. It allows for the inclusion of a multitude of techniques – especially the integration of Lean and Six Sigma – and is often more acceptable to the ears of those in non-manufacturing pursuits. The generality of the term is also its weakness because anyone doing anything to improve performance can proclaim they have OpEx – which may or may not be true.

While the basics never change, the Lean of today has many additional bells and whistles that Toyoda, Ohno and Shingo did not develop but would have welcomed. Anything that enhances the fervent elimination of waste is part of Lean.

Implementing Lean Manufacturing: The evolution of Lean manufacturing from mass production, to the Toyota Production System, to the people-focused Lean enterprise

Figure 1: Where Did Lean Manufacturing Come From, Where it is Going

Pull Versus Push in Lean Manufacturing

A critical distinction between Lean and traditional systems is the pull philosophy of Lean versus traditional manufacturing’s push philosophy. Figure 2 displays the mechanics of a typical push system with three employees working on three consecutive processes. The curved arrows represent sequential actions of each process step. In this example, each of the three workers does his / her work at the same time independently and then passes the completed item to the next worker. We assume that each worker performs each and every task at a constant rate of speed.

Conceptual representation of a traditional push system prior to adoption of lean manufacturing principles

Figure 2: A Conceptual Representation of a Push System

The “start” scenario illustrates the situation in the cell as it has just started to work on a new product. The Process A worker has four pieces of Raw inventory waiting to be worked. There are also four pieces of Work-In-Process, or WIP, waiting for both the Process B and Process C workers. Each worker has one piece of work at their station. There are four pieces of Finished Goods waiting to be picked up after Process C.  In Figure 2, the processes are not balanced. We know this because the workers, operating at a constant rate of speed, require different amounts of time to do their work. Takt Time (TT) is noted for each process. Because at least one of the workers is over the Takt Time (TT), it will be impossible for the three-person workgroup to meet customer delivery demands unless additional resources in the form of time or people are added.

Takt is the German word for “cadence” or “rhythm” (pronounced “t-ah-k-t” in German but typically pronounced “tack” in English). In the TPS, Takt Time is the heartbeat; it is the standard time interval between the each output of a product from a process that is required to meet production demand.

TT is obtained by dividing the total amount of work time in a day or shift by the required output. That is: Takt Time = total time in seconds / required output. The bar graph below each process represents the amount of actual time that each worker requires to perform their work to the product.

The rate of completion of work for each process varies because the work is unbalanced: Process C takes the longest, B is the fastest. Process A tasks are the only ones that match the Takt Time exactly.

After some period of time operating under the typical push philosophy, the original “start” situation has evolved into the “later” example shown in the bottom half of Figure 2. With a starting level of four pieces of inventory between each worker, Worker B frequently ran out of material because they are out of balance with the preceding process (A). The supervisor or manager, uncomfortable at seeing an idle worker and believing that any work is better than none, ordered that more inventory be added so that Worker B could stay busy. This typically happens as managers strive to make “earned hours” or “standard labor hours” look better. If the workers in Processes A, B and C are operating machines, the quest for better “absorption” numbers creates additional pressure to build up inventory.

Raw material accumulates with Worker A because it is pushed to the operation by Materials Management and Production Control. More and more inventory is added until all workers are kept busy all the time. The result is masses of inventory of all types – Raw Materials, WIP and Finished Goods. Upon seeing busy workers and a lot of inventory, managers receive the false perception that considerable value is being added and that there is a lot of product almost ready to meet customer demand.

The total output of the combined processes of cells A, B and C can only ship at the rate that Process C can complete the work. If any process downstream has a problem, other upstream processes will continue to churn out inventory. All of the WIP and Raw inventory is irrelevant to meeting customer requirements. All of the labor that is added to inventory that cannot be shipped is waste – and no, it is not “pent-up value.”

Worst of all, because everyone appears busy, the issue of unbalanced work between the three workers and the inability of the cell to meet takt time is seldom addressed.

This is the root cause of the entire inventory buildup. Rather than focusing effort on balancing the work in the cell, the push reaction is to resort to overtime, more workers, more expensive equipment, or all three.

Note the diagonally striped squares that appear in the “later” scenario of Figure 2. These are “problem” assemblies: a part was bad, an assembly error was made and / or a component was missing. When one of these problems occurs, the unit is pushed off to the side for later assessment. However, in most push systems, these problems are rarely addressed — and, when addressed, never timely. With the organizational imperative to stay busy and make more, the problem units appear insignificant among so much other inventory.

Figure 3 presents analogous “start” and “later” scenarios for a pull system. A detailed examination of demonstrates the power of a pull system to overcome the problems created by the push approach. In the “start” configuration, the times for each process to complete one unit are identical to those in Figure 2, as is the TT.

The first thing noticeably different about Figure 3 is that there is little inventory. This is not something that happens all at once when transitioning from the Figure 2 push system, but is a gradual result of moving towards a pull system. The second major difference is that the three processes do not work independently. Work is always “pulled” from upstream.

Conceptual representation of a lean manufacturing pull system with takt time, WIP, kanban signals and finished goods

Figure 3: A Conceptual Representation of a Pull System

The pull begins when the completed unit at station one (1) is removed. This creates an empty spot, which generates a need that pulls the completed unit from Worker C. This pull message is called a kanban (denoted by dotted box in Figure 3).

Kanban in Japanese, originally meant “store sign.” It is said that Kiichiro Toyoda got the idea for the pull system from a visit to a US supermarket after World War II (goods pulled off the shelf today are replaced tomorrow). In reference to what he had seen, he called a pull signal a kanban (rhymes with “bon-bon”).

A kanban can be a spot on the floor, a pallet or a piece of paper attached to the material or the material’s container. Traditionally, it was a card or sheet placed in a see-through pouch. The kanban states what it can accept.

For example, if a pallet is the kanban and a pallet can hold 16 assemblies, Worker C could continue to place work on the kanban until it has reached its limit of 16.

At that point, no more units could be added to the kanban. Worker C would have to stop working after completing the unit in front of him and wait until the kanban was emptied. In our example, the kanban only holds one piece. If the downstream kanban is full and Worker C has completed work on the at their station, they must stop working and wait. Nothing can move without a kanban, only Production Control can create new ones.

The beauty of the pull system is that if there is a problem at a downstream process, the entire line stops. No worker is permitted to work on another unit and / or build up inventory unless a kanban arrives. The “later” scenario in Figure 3 shows that the three processes are more balanced than at the “start” scenario. In a pull system, there is a continuous effort to balance work between adjacent processes workers and cells to eliminate waiting and reduce WIP inventory.

Also note that there are no problem units in the later scenario. Since inventory is not pushed along the production sequence, each problem unit in the pull scenario creates an “empty spot” in the process chain that cannot be hidden by WIP inventory. Management and employees are energized to address problems by the very nature of the pull system. As a result, errors decrease and quality improves.

**********

If you’re ready to read the entire white paper now, click here to access it via our Resources page.

This post is the first excerpt in a 3-part series from Kaufman Global’s updated white paper, Implementing Lean Manufacturing: A Holistic Approach. In this paper we discuss:

  • An integrated model for Lean implementation
  • How to improve engagement and alignment
  • Why “pull” is so fundamental to Lean success

In this installment: THE EVOLUTION OF LEAN AND WHY PULL IS SO IMPORTANT, we describe the foundations of Lean over the past half-century and why pull vs push is one of the most fundamental aspects of any Lean system.

Part 2 discusses why Taiichi Ohno’s original 7 wastes must be updated to include two new ones: Alignment and Engagement – which if not addressed will foil any implementation.

Part 3 provides an easy to understand table that shows the systemic nature of Lean: wastes, approaches, methods, tools and results and describes a fail-proof system for implementation. For over 20 years Kaufman Global has pioneered the interface between people and process, always with engagement and alignment at the core.

Operational Excellence Can Save Millions (and Millions)

/in /by

Well… the exact number is not certain, but your organizations could get much more from their OpEx by shifting perspective.

Operational excellence is another way of saying “comprehensive process improvement.”

As an enterprise function it’s better than ever. Across business and industry (government, healthcare, services and manufacturing) it delivers year-over-year benefits. Yet, results could be much better. Many of the Operational Excellence (OpEx) programs we encounter are too narrowly defined and treat OpEx simply as deployed resources with some useful tools.Connected Team

A broader definition recognizes operational excellence as a result and OpEx as a system that affects the entire enterprise. It’s not an overlay, but rather a cohesive network of people applying standard techniques to deliver and improve results.

The Operational Excellence Function Emerges

In the mid-90s, OpEx programs began to emerge from their automotive heritage, branching into other settings where they were perceived to offer a return on investment. Many of those efforts fell under the headings of Lean and Six Sigma. The basic concepts of process improvement have changed little over time but there has been such a proliferation of techniques and jargon that it can be a little confusing. Now we use terms like Continuous Improvement (CI) and Operational Excellence (OpEx) as a catch-all for anything related.

A few major themes are part of any OpEx endeavor, such as: what it works on, the techniques applied and how its organized. These attributes can be designed-in, or as is often the case, derived incrementally and ad hoc. This happens when one part of the business tries one approach, while another faction tries something different. Instead of resolving to a standard, the outcome is often the ‘tyranny of the OR’ where it’s hard to discern what is working and what is not. “Are we doing this, or are we doing that?”

Let’s look at these three themes in a little more detail.

The Focus of Operational Excellence

OpEx has two modes:

  1. Reaction – Responding to the most pressing issues of the day in areas such as productivity, quality, service and customer satisfaction.
  2. Prevention – Focusing on incremental improvements and sustaining; including process adherence and change management.

This is the right combination, but it’s pretty easy for organizations to get stuck in reactive mode and think of OpEx people as fire fighters whose main job is to put out fires instead of prevent them. This weakness can contribute to the downfall of OpEx when times get tough. Then, the biggest issue may be cutting cost and OpEx is often a cost that gets cut early. The up and down behavior makes it even tougher for the OpEx function to take off each time there is a restart.

Operational Excellence Techniques Applied

Tool kits includes things like: Lean, Six Sigma, manage change, coach, facilitate, deploy policy, map value streams, define standard work and conduct kaizen events and workshops, etc. That’s a pretty big list. Organizations often attempt to include too many tools and end up doing few of them well. Efforts can feel disjointed because they are. This is an area where the need for tool selectivity and standards guided by OpEx governance is obvious, but often lacking.

Differences in techniques applied across various industries have less to do with type of industry and more to do with the plethora of opinions, experiences, and competing priorities. For sure, a variety of techniques are expected and one size does not fit all. But wherever people and process come together, while the vocabulary and examples change, waste elimination and variation reduction methods don’t differ too much. Moreover, the methods and structures that deal with behaviors, engagement and change management are always the same.

OpEx Can Be Organized In Several Ways

Maybe the most obvious shift in recent years is the rise of OpEx as a legitimate internal function. This means that, at the very least, people are identified on an organization chart. Assigning resources is a good thing, but the amount of variability in how talent is applied suggests too much experimentation. Models include:

  • Corporate Owned – Resources are sponsored by headquarters and mostly directed from there
  • Operating Unit Owned – Resources are sponsored by and embedded within the operating units
  • “Spray and Pray” – Broad skilling of associates without requirements for immediate application
  • “Hammer and Nail” – Attack obvious problems with available resources, often with limited tools and experience

operational excellence can save you millionsIn practice it’s typically a combination of all of the above. The ratios shift over time as organizations learn and politics play out. Striking the right balance is essential for OpEx effectiveness. Articulating governance, communication and how people engage are all critically important.


A Systems View of Operational Excellence

The themes noted here – targets, techniques, organization – should be familiar to anyone who has worked on or inside of OpEx. It’s easy to get caught up in organization charts, tools and the “fires”. When this happens, focus narrows and we miss the opportunity to engage broadly across the entire enterprise.

Operational excellence is not a function. It is a RESULT that is best achieved by an OpEx SYSTEM that engages everyone.

Effective OpEx systems balance corporate and operating unit needs, target urgent problems and prevent others from ever occurring. They define, and then use, standard work to get things done. Reporting, capturing best practices, communication and sharing information is described, done and enforced. These are the things the OpEx function should be working on.

Broad organizational involvement and commitment is perhaps the most obvious benefit of a robust OpEx system. Leveraging the knowledge and input of those closest to their work shows respect for people and drives decision-making to the lowest possible level – a key tenant of an improvement culture. A fully engaged organization achieves relevant results, gains traction and becomes a sustainable continuous improvement engine. When the OpEx system is designed and defined, its performance can be evaluated and improved. A good OpEx system is:

  • Simple – The easier it is to understand, the easier it is to see if people are doing it
  • Engaging – Everyone participates. Ownership and expectations are articulated
  • Actively Managed – Leaders are hands-on in guiding the change process
  • Structured – The way the organization is expected to interact is clearly defined

FlipchartDon’t over-complicate it. Too many rules lead to unwarranted bureaucracy and can kill beneficial creativity. If design and definition become the major focus, no one will ever get out of the blocks and actually start fixing things. Balancing standard requirements with creative and flexible problem-solving is one of the great challenges. Sorting that out creates a sense of ownership and develops the organization.

As people should be at the heart of any OpEx system, start by describing the critical few things that demonstrate personal participation and then link these elements to recognition and reward. This is just one of many small steps that the enlightened enterprise goes through to become operationally great. It can be done once leaders decide that operational excellence is a literal objective and OpEx is a system for engaging the organization instead of a check the box function or a quick-fix for the crisis du jour.

Want to read more on topics like this? Head over to our Knowledge Center to get access to our full catalog of white papers.

World-Class Performance and the 20 Keys

/in /by

The 20 Keys are a powerful method for first assessing current state performance in operations, and then developing an action plan for improvement to achieve world-class performance.

What is World-class?

world–class

adjective
: among the best in the world
: being of the highest caliber in the world <a world–class athlete>

Source: Webster-Merriam.com dictionary

What does the phrase “world-class” really mean? This question has been asked since the term first became popular in the 1950s. Companies that are considered to be world-class consistently exceed customer expectations. This type of performance isn’t accidental. It requires systems that adapt to dynamic environments. Kaufman Global frequently uses the 20 Keys system in our work with clients that are pursuing world-class performance.

The 20 Keys Help Organizations Focus

Lean is an important element in the pursuit of world-class. The simplest definition of Lean is: “The relentless pursuit of waste elimination.” Regardless of business type or industry, many companies have great success with their Lean efforts. Unfortunately countless others don’t. Maybe this is because there are so many opportunities to eliminate waste that it’s easy to get distracted, lose focus and wander off course. This isn’t a new problem. Decades ago Iwao Kobayashi at Toyota evaluated manufacturing companies that were considered to be world-class and identified crucial areas that must be addressed in order to achieve such status. He categorized these areas and put them into a framework called the 20 Keys.

Kobayashi’s original Keys addressed an entire manufacturing facility. Kaufman Global expanded the concept by developing sets of 20 Keys for many functions such as Healthcare, Engineering, Supply Chain, and Finance, among others. We then integrated the technique into our Lean Daily Management System® (LDMS®) methodology so that measurement takes place at the work group level.

The Kaufman Global 20 Keys® methodology:

  1. Is a continuous improvement mechanism that combines intuitive world-class definitions with a means of measuring and scoring group performance
  2. Focuses intact teams on the issues that affect their work
  3. Can be implemented and linked across the organization to provide a comprehensive evaluation of effectiveness

Strategy and Tactics

At first glance, the 20 Keys may seem like another audit technique. But when this powerful system is deployed inside the Lean Daily Management System, it enables work groups to take increased ownership of their daily work. As an added benefit, these highly relevant, local improvement efforts can be rolled up into organization-wide results by providing a common measurement system amongst multiple locations. The graphic below shows how the 20 Keys works both strategically and tactically, linking the big picture goals of leadership to improvements in day-to-day work. The 20 Keys takes an organization’s vision of world-class and:

  • Connects the vision to actions by breaking it down into manageable pieces
  • Provides an easy to understand and manage measurement system for progress toward the vision
  • Enables relevant improvement plans close to the issues

how to achieve world class performance

Work group Application

Once the vision and strategic priorities of the organization are set, intact work groups complete a 20 Keys assessment and planning cycle to baseline their performance. Each key is evaluated at five levels of performance, ranging from 1 (Traditional) thru 5 (Best-in-Class). There are no ½ points and all statements or requirements must be met in order to achieve a given performance level.

With the baseline score established, the team selects their initial improvement keys and goals and creates a plan to achieve the gains. For example, if Safety was one of the keys identified for improvement and the current level of Performance was a 3, the team would be meeting the following definition:

  • Safety – Level 3: The concept of unsafe behavior is well understood and associates are familiar with the specific unsafe behaviors that create hazards and / or accidents in their area.

To improve their score and achieve the next level performance, the team would need to establish new work rules and processes that ensure all Level 4 criteria were consistently met:

  • Safety – Level 4: Unsafe behaviors are audited weekly and the results are posted. The team strives to eliminate root causes of unsafe situations and it is accepted practice for associates to coach each other on safe behaviors.

The 20 Keys of Lean Manufacturing

Regardless of whether the team sets an annual improvement goal of 10 points, or a quarterly goal of three points, it is important that they assess their performance against the plan at least every three months to ensure the action plan is being implemented and progress sustained. Posting the 20 Keys scorecard and implementation plan in the work area on the primary visual display enhances visibility to improvement progress and is a best practice.

Building the Foundation for World-class

World-class levels of performance are not achieved by accident, but through the execution of an incremental and strategic implementation plan. Kaufman Global has helped many organizations implement the 20 Keys and focus their improvement efforts. If you’ve already established a good foundation of continuous improvement, or even if you’re just starting the journey, the 20 Keys is a good way to enhance results and sustain momentum.

**********

To learn more about how to apply the 20 Keys and achieve world-class levels of performance, click here to download our Evaluating Continuous Improvement Effectiveness with the 20 Keys white paper.

The 20 Keys are part of Kaufman Global’s Lean Daily Management System ®.

The 20 Keys are discussed in this article: The Missing Link of Lean Success.

Relearning Jidoka From a Robot Vacuum Cleaner

/in /by

About 20 years ago, when I first trained on the Toyota Production System, it was presented to me that the second pillar of the Toyota production system was “Jidoka”. Jidoka is a Japanese word that means “automation with a human touch”.  As I learned later, this definition just does not convey the quality concepts embodied in Jidoka. I admit, I had difficulty learning the Jidoka pillar because I got stuck on the word automation. I thought it was a call to automate processes with numerical control.

My Japanese Sensei explained that American Lean practitioners use the word “autonomation” instead. Hmm … sorry … not getting it. Still sounds like automating something to me.  Later, during a plant tour, the Sensei pulled our group aside to show us a u-shaped manufacturing cell with 12 machines being operated simultaneously by a single operator. The operator’s job was to unload and reload a machine, press the start button, carry the processed part to the next machine, unload that machine and load the part from the previous machine, press start … and so on, for the entire circuit. Ah hah! The light bulb came on! Autonomation means achieving autonomous operation of a machine; getting it to run autonomously and make good parts, without the necessity for a human to stand there and watch it.

Back to the present. Last fall my wife and I saw numerous TV commercials promoting a robot vacuum cleaner. My wife thought it would be neat if it really worked. I remembered this at Christmas time and decided to surprise her with the thing she had commented on months earlier.  She was indeed surprised, but not the way I expected. She immediately asked if I had problems with the way she cleaned the house!? (Key learning point: Don’t give your wife a vacuum cleaner as an unexpected gift.) Jidoka and the robot vacum cleanerOnce I got through that minefield, I skimmed the instructions and we picked the first room to clean. I positioned the electronic boundary beacon in the doorway, plugged in the base station, set the robot, pressed start and let it go. Fascinating! The robot started off in a random pattern throughout the room. When it bumped into something it stopped and turned in another direction. It remembered the walls and furniture it encountered and explored their boundaries. It was a big hit. My wife thought it was cute and fun to watch! Having redeemed myself, I left her to enjoy her gift.

Twenty minutes later I checked on the robot and found my wife still watching. “So what do you think?” I asked.

She replied, “Well it saves me physical work but it does not save me time. I can do it faster myself. I could be done and on the way to the store by now.”

“What’s stopping you from going to the store?”

“I have to watch it.”

“I can see you are fascinated by it, but why don’t you let the robot do its work and go do something else?”

“It might do something wrong. It could get stuck, fall down the stairs, or make marks on the furniture. It might miss some spots.”

“Have any of these things happened so far?”

“Well, no. When it went into the corner and bumped the walls it rotated until it found a path out. Same thing around the furniture.“

“How about the stairs?”

“It started to go past the edge, then stopped and backed up.”

“OK, so it detected the ledge and responded to prevent it from falling down the stairs. Hmm… I wonder what would happen if it got stuck under the couch or got in a tight spot?”

We positioned a chair over the vacuum so that it was penned in. After a few attempts to free itself, the robot stopped. It beeped a few times and a recorded voice said “error, error”. I removed the chair, pushed the blinking start button and it started vacuuming where it left off. A few minutes later, it drove onto the base station, beeped to signal it had completed the room and turned itself off. I could tell from observing the wheel patterns in the carpet the vacuuming job was complete and no sections were missed (visual management).

This suddenly felt familiar. “You know,” I said, “the vacuum cleaner is a machine designed to do a process that humans do. To be effective it must be able to detect exceptions and respond, so they don’t become problems or continue as work defects.” I continued, “For the vacuum cleaner, the response may be a countermeasure such as turning or backing up, or shutting down and signaling that human intervention is required to resolve a problem.” In essence the machine has been equipped to sense problems and make some human-like judgments (automation with a human touch). It has sensors to detect when it runs into something or may run off the floor, and they tell the computer processor a response is required (detect abnormalities). We saw the machine making these adjustments and we tested it for its response to a problem (stop the line for quality problems).

I asked my wife if she thought she could trust the robot to do the job properly without damaging anything. I forged ahead saying, “If you can, then you don’t need to watch it run. The human work has been separated from the machines work. Your job is reduced to plugging in the base station, pressing the start button and walking away.”

Her response was a somewhat cool, “Uh-huh …”

Sensing I was once again nearing the minefield, I quickly said, “How about you plug the base station in the den, press the start button and I’ll take you out to dinner while it works.”

Here is our glossary definition for: Jidoka

Improve Operations Fast: 5 Transformation Tools

/in /by

When it comes to driving business improvements, the term “transformation” is overused. Transformation indicates a fundamental shift from one state to another.

Question: How often do organizations make such bold and radical choices and stay the course?

Answer: Rarely.

Years ago, I worked for an automotive tier 1 supplier that was facing all kinds of operational problems. Many of their challenges stemmed from an increasing number of additional products that required new machines and equipment, posing the question, “Where do we place them now?” Other challenges included long, complex delivery routes with WIP in every process step, conveyor belts creeping all over the place and inventory build-up. The list was endless. In the midst of it all, the manager had been trying to create efficiency to the best of his abilities but was failing ― slowly but surely.

Drastic change was needed. As a result, the plant shut down for a week, during which all machines were removed, and within that week everything was re-installed but in a complete new configuration based on one overarching principle: Flow!

Such drastic change is surely not always needed ― nor does it happen in many cases ― because most organizations do not have the collective courage to make such a decision.  So, often a choice is made for gradual, incremental changes, but incremental to what? In order to build a house you do start with the foundation don’t you?

TransformationA solid transformation does not happen incrementally. Instead, it happens dramatically and visibly. Incremental enhancements to operations are Continuous Improvement (CI) efforts, which are crucial to be truly competitive but happen at a slower pace. In situations where bit-by-bit simply isn’t cutting it, organizations should consider real transformation. Only then will dramatic results be achieved through bold change and decisive action.

If you’re considering a transformation effort, where significant results need to be generated fast, be sure to apply these five fundamentals to increase your odds of success:

1. Understand the Objective(s)

Identify one or two significant targets. Make sure that the objectives are quantifiable ― measurable up and down the value stream. Usually this involves a few fundamental measures that have a solid connection to bottom line results. Cost is often used because this mega-process measure wraps up just about everything, but especially materials and labor. But it could be other things like asset utilization or quality. The point is that these are big-picture, corporate target objectives that flow down inside the transformation initiative, generating the business case for change.

2. Make a Plan

The plan has to be simple enough to understand, but detailed enough to answer the basic questions that everyone will have: Who, What, When, Where, How, and How Much? This seems like basic information, but once you start to think about this in the context of a complex system (i.e., the operation), you realize that it really does take some thoughtful consideration. The better you do upfront on these important questions, the less time you will spend re-directing later on. Yet, there will be unknowns, so don’t over-analyze. Make enough of a plan to answer the questions and get started.

3. Apply Resources

Resources to drive transformation fall into two areas:

  • The resources necessary to push the organization off center and force the initial change. This takes significant energy and can’t be overlooked. Everyone already has a full-time job. Don’t expect the line organization to have the extra time necessary to effect a dramatic change. The bottom line is that some form of external support is most often required. It can be staff from other locations or external resources who make the initial push, but realize that they won’t be the ones to sustain or ultimately own the change.
  • The line organization who must ultimately own the initiative. The skills needed to push the organization in a new direction are not necessarily the skills required to sustain the change. But, once the initial rapid change is accomplished, it will take a lot of energy to hold into place. Don’t worry, this isn’t extra energy; it’s actually less energy than the old, waste-ridden practices prior to the transformation. Even so, the organization will attempt to do both the old and new ways. For this reason, you will need to apply internal resources to keep the new good practices in place, and to add even better ones as time goes on.

4. Over-Communicate

Make sure that everyone is clear about the objectives and plan to accomplish the objectives. A well-defined communications plan is an essential ingredient of success. Keep everyone informed about progress, challenges, accomplishments and, most of all, results — even the small ones. Near-term wins along the way will keep people energized and provide powerful ammunition for those who resist the change in favor of the tried and true ways of the status quo.

5. Measure the Results

Results give efficacy to the entire initiative. Many people have put themselves on the line, risen to the challenge and accepted the risk that comes with bold action. Do not abandon the proof that the effort — everyone’s effort — was worth the trouble. The key to sustainability is to make sure to have a system in place that can measure the results on the front line day-by-day and at the operating level month-by-month.

Want to learn more? For a solid example of an organization that dramatically transformed its manufacturing operations, click here to download our white paper, “Transforming Operations into a Strategic Competitive Weapon.”

Lean Should Be Part Of Your Growth Strategy

/in /by

Lean is about waste elimination right? But to what end? The Toyota Production System (TPS) promotes eliminating waste in the pursuit of higher quality, lower costs and improved delivery with empowered employees. Yet, what is the ultimate objective? If you have “all of the above”, these are several things you don’t need to worry about as you pursue new customers and new markets. In our view, Lean is the ultimate strategy for growth.

Beyond Cost Reduction

In partnering with clients on Lean initiatives around the world, we often find that people equate “waste elimination” with “cost reduction.” This mindset is a cultural response to working in departmentalized operations, plants and processes that are measured as cost centers. Since most employees are not directly connected to generating revenue, their contributions to financial performance are only seen through cost and budget statements. This “cost reduction” view is sustained when organizations measure the success of their Lean programs based on savings from individual projects, Kaizen Events and employee involvement activities.

Don’t get us wrong. Organizations expect their Lean programs to deliver bottom line results, and they should track the returns from each Lean activity being conducted. However, there is much more to gain if they can transcend the cost reduction view and understand that Lean can be a powerful growth enabler when applied strategically to the business as a whole.

Growing the Bottom Line

Eliminating wasteful activities allows organizations to get work done with less effort. It’s also proven to increase output for the same effort. For example, one of our clients recently set out to improve its outside sales process. This was a cumbersome process involving documentation and approvals through the corporate office, extensive reporting and multiple trips to prospective customers to close a sale and / or to follow-up on billing issues. Upon conducting a highly focused workshop (Kaizen Event), a cross-functional team identified ways to reduce paperwork, eliminate steps, and prevent errors / exceptions.

weighing costs vs salesAs the team began calculating the cost savings of the new process, an “ah ha” moment occurred. The Director of Sales jumped up and said, “Wait, we are looking at this all wrong. What we have really done is create an opportunity for all of our sales representatives ― in every territory ― to spend an additional 10% of their time meeting with prospective customers. This has the potential to grow the company’s bottom line far more than cost reductions. Let’s project the value of that growth and go for it!”

Managing the Value Stream

Stated another way, Lean can be applied to increase revenue without proportionally increasing costs. For instance, let’s say there’s a manufacturer that is starting to recover from the recession. Orders are increasing, but the product mix is less predictable. In this situation, what’s the most effective growth strategy?

Manufacturing operations can be viewed as a stream of value-adding processes that create a product for sale to the customer —known as a value stream. Accepting that a value stream is no more effective than its weakest process, the best strategy for growth is to progressively improve those areas that will increase the output of the value stream as a whole. For example, doubling the productivity of a single process in the middle of a value stream does not necessarily increase the total output of finished product for customers.

Lean activities must be prioritized to progressively and continually improve quality, eliminate wasteful actions, re-balance work, and reduce causes for wait times. Attention needs be placed on continually improving the next constraining area. It’s not enough just to increase volume, as it just adds inventory (not profits). In fact, producing too much of the wrong product — and not having the product the customers want, when they want it — will reduce profits.

In the end, what adds more to the bottom line?

  1. Increasing sales by 10%, without adding labor; or
  2. Pursuing a 10% reduction in labor, while maintaining sales

The answer is a simple. In addition, accelerated — more substantial — growth can be achieved by continuously improving quality, cost and delivery at a faster rate than the competition.

Take Action to Make Things Happen

/in /by

In life, there are those who watch things happen, and those who step up, take action, and make them happen.  This concept is woven into the fabric of today’s aggressive and diverse economic landscape where organizations seldom stumble upon success by simply having a strong product or service offering. On the contrary, attaining business differentiation — and sustaining a level of success — requires assertive action – that is; a strong and enduring bias for action. Leading organizations do not sit back and hope for better results. They are far too busy creating them.

the opposite of take action - how I feel all the timeOver time, whether we admit it to ourselves or not, each of us have fallen victim to envy. Being human, we simply cannot help ourselves. When we see others win the lottery, get a promotion, or take an extravagant trip, there’s a small part of us that asks, “Why not me?” We wonder why and how others are achieving such great things. Ironically, in most of these situations, we never bought a lottery ticket, didn’t take the time to apply for the job, and / or spent our vacation money on a home renovation project. Yes, we have high aspirations, but we often make no real commitment — or exert any true energy — to reaching them.

This type of behavior is commonplace in the business community. Leaders often gain a better understanding of their own organization’s challenges by focusing on (envying) their competitors’ successes. For example, upon hearing how another organization realized millions of dollars in cost savings or has been recognized as one of the “best places to work” as a result of Lean transformation efforts,  many leaders do little more than share the story with their team and ask “Why not me (us)?” Even though there are countless business cases supporting waste elimination initiatives, few dedicate sufficient time and resources to effectively implement improvements. For those that do, many struggle to commit to long-term change and, therefore, find themselves circling back to the same question.

Lean is a people system that promotes teamwork. Instead of an environment of one-upsmanship, with Lean you have people (teams) that focus together on common objectives.  A powerful body of knowledge, it creates an atmosphere in which every employee at every level has the focus, structure, discipline, and ownership required to generate improvement, commitment, pride, and enthusiasm that causes the organization to excel. When supported by structured engagement, Lean methods improve every business challenges and job functions. A few examples include:

Employee Retention

A hospital had been experiencing a high degree of front line employee turnover for several years. Recent metrics revealed that 47% of its new hires left in the first 12 months and 74% in the first 18 months. To address this significant challenge, a disciplined, comprehensive project was organized to drive improvements that would increase employee involvement and reduce ongoing organization stressors fueling high turnover. Partnering with Kaufman Global, problems were measurably targeted and new methods and systems were introduced to address issues through Lean Leadership® learning, Rapid Performance Evaluation (RPE), and The Lean Daily Management System ® (LDMS) implementation. Employee ideas are now constructively integrated into the daily work. After only one and a half months on the project, employee flight stopped its free-fall and signs are good for a sustainable reverse of fortune. Employees can now be heard saying, “this is our chance to make a difference. ” Related article: Employee Retention: Strategy and Tactics.

Rework and Machinery Stability

A global tire manufacturer needed to reduce rework and improve machine stability as a foundation for the implementation of a pull scheduling system. Kaufman Global provided oversight of the strategy, design and sequencing of the project through the development and launch of a multi-phased approach. Phase 1 consisted of establishing cross-functional teams to enhance processes for improving changeover times and overall equipment effectiveness (OEE). Phase 2 involved the pull system development and associated pre-implementation work. To drive sustainable change, workgroups and task forces were mentored, trained, and engaged by working side-by-side with Kaufman Global to actively apply Lean principles to their operations.

Upon completion, a successful demand-pull inventory management and scheduling system was developed to right-size inventory, enabling $750K in annualized savings. Cycle time was also reduced by 17%, resulting in an increased capacity of 274 tires per day.

Productivity

One of the largest mini-mill steel makers in North America needed to improve productivity on direct labor by redeploying manpower, reducing overtime, and increasing utilization. With a focus on enhancing operational and functional performance, the client needed to develop internal Lean experts to drive improvements and compel a company-wide customer-focused culture. Over a two-year period, Kaufman Global led analysis, program design, implementation and internal capability development efforts. Plant throughput was optimized by expanding OEE, equipment reliability, product yield, and changeover time work streams. A production planning system was also developed to increase responsiveness to customer demand.

As a result, the client achieved capacity increases through a 43% reduction in changeover time, enabling $1.1M in additional revenue. Raw material inventory was reduced by over 50%, driving savings of $25K per month. They also recovered 415 man hours, saved 334 miles of walking and resolved four ergonomic issues.

Success stories like these are abundant for those organizations who fully commit to establishing a Lean culture. Want to find out more about how Kaufman Global works with clients around the world to improve and sustain their results, contact us here.