The Box Score: Visualizing Lean Accounting for Everyone

9/1/20

THE BOX SCORE: VISUALIZING LEAN ACCOUNTING FOR EVERYONE

Gary Kapanowski

MPlus Contributing Editor for Journal of Cost Management

2 BIO

Gary Kapanowski, Certified Lean Six Sigma Master Black Belt and Certified ASQ Bronze Lean professional, is cost accountant and Lean Six Sigma Master Black Belt Lecturer at Lawrence Technological University Professional Development Center. • Contributing editor for the Journal of Cost Accounting and publishes the annual lean edition, in its 7th year, published 20 articles on lean and accounting • Conducted over 190 lean workshops and event with over 1,000 hours of training to over 7,000 professionals and university students at over 45 universities • Annual conferences speaker for the Institute of Management Accountants, Association of Strategic Planners, Michigan Lean Consortium, Lean Accounting Summit, and NE Lean Conference • 2006 Financial Executive of the Year award from Robert Half International and Institute of Management Accountants (IMA) • BBA in accounting from the University of Michigan and an MBA in Finance and Marketing from Michigan State University

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3 JOURNAL OF COST MANAGEMENT

4 Abstract

Identifying lean improvements can be challenging for many teams.

Some of the problems include but not limited to what metrics to use, how to present the information, and when to present the information.

One of the tenets of lean accounting is the Lean Box Score, a three-dimensional view of the value stream.

The Lean Box Score will provide clarity and transparency to produce organizational buy-in for sustained continuous improvement along with enhanced business decision making.

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5 Agenda

History of the Lean Box Score

Three-dimensional construction of the value stream

Lean Box Score examples

6 The View from the Beach

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• History of the Lean Box Score

8 History of the Lean Box Score

Brian Maskell & Bruce Baggaley

• 2005 Lean Accounting Summit in Detroit, inaugural event

• What’s Lean Accounting All About?, Association for Manufacturing Excellence’s Target Magazine first issue of 2006

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9 History of the Lean Box Score

Traditional Accounting Systems are anti-lean:

• Large, complex, wasteful processes requiring huge amounts of non-value work • Measurements and reports that motivate large batch production and high inventory levels • Financial reports will often show that bad things are happening when very good lean change is being made • Very few people in the company understand the reports that are used to make decisions

• End result: Making poor business decisions

10 History of the Lean Box Score

Lean Accounting Principles, Practices, and Tools

Five Principles: • Lean and simple business accounting • Accounting process that support lean transformation • Clear and timely communication of information • Planning from a lean perspective • Strengthen internal accounting control

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11 History of the Lean Box Score

Accounting process that support lean transformation

Management Control & CI • Box Score - performance board updated weekly, etc. • Value stream performance • Pareto chart / root cause analysis • Current / future state maps • Mission Control for CI

12 History of the Lean Box Score

Clear & timely communication of information

• Visual Management • Foundation of lean management • Box score is the one-sheet summary of the value stream

• Decision Making • Box score main report used

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13 History of the Lean Box Score

IMPROVED DECISION MAKING

Supports lean growth • Increased demand strategy • Available capacity at no additional cost

• Speeds the decision making process Simple • Empowers the value stream

• Real numbers used Accurate • Real profitability analyzed

14 History of the Lean Box Score

Acceptance of the Lean Box Score

• Try and do

• Leading indicators

• Trends to indicate improvement

• Soft dollars turn into growth & hard savings

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15 History of the Lean Box Score

Planning from a lean perspective

• Impact of lean improvement • Operational • Financial • Capacity

• The bridge from operational to financial is the capacity change

• Financial impact is the decisions how to utilize the freed-up capacity

16 History of the Lean Box Score

Investment in People:

Two areas for lean transformation • Active senior leadership

• Focus on people than lean tools • Box Score provide the measurements to verify training, involvement, and empowerment are working

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17 History of the Lean Box Score

Brian Maskell and Bruce Baggaley

• Use visual management to display information

• Trends and comparisons

• Idea for visualization: • Thought of baseball and basketball

18 History of the Lean Box Score

History of the use and naming of the “box score” can be traced to the early days of baseball.

• Baseball increasing in popularity in the mid-1800’s • Only read about in paper, limited experience • Henry Chadwick connected fans through box score • Knowledge of cricket, baseball, and statistics along with his skills as a professional writer. • Chadwick's 1859 box score from the Brooklyn Excelsiors loss to the Brooklyn Stars.

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19 History of the Lean Box Score

The tabulation of individual box scores led to modern statistical measures of batting averages and earned run averages.

• Sabermetrics started as a quantitative approach • Identify undervalued players • Detailed evaluation beyond traditional statistics

• Visualized in book and film Moneyball • Advanced use of computer programming and data collection • Changed the way baseball is played and viewed by team managers and fans

• Three-dimensional construction of the value stream

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21 Three-Dimensional Construction

Box Score is a three dimensional view of the value stream – Operational

– Capacity – Financial

GOAL: accountability & responsibility

22 Three-Dimensional Construction

CURRENT STATE FUTURE STATE ANALYSIS SALES PER PERSON $ 7,500 ON-TIME SHIPMENT 92% FIRST TIME THROUGH 70% FINANCIAL DOCK-TO-DOCK DAYS 30.00 IMPACT OF LEAN: LEAN BOX AVERAGE COST $ 420.50 OPERATIONAL SCORE ACCOUNT RECEIVABLE DAYS 50.00 PRODUCTIVE CAPACITY 51% SHORT TERM: not EXAMPLE NON-PRODUCTIVE CAPACITY 30% seen in cost EMPLOYEE AVAILABLE CAPACITY 19% reduction but in PRODUCTIVE CAPACITY 55% CAPACITY NON-PRODUCTIVE CAPACITY 30% productive or MACHINE MATERIALS AVAILABLE CAPACITY 15% available capacity REVENUE $ 350,000 MATERIAL COSTS $ 115,000 LONG TERM: Lean CONVERSION COSTS $ 110,000 TOTAL COSTS $ 225,000 $ - seen in overall Transformation VALUE STREAM PROFITS $ 125,000 $ - cost reduction

shown in cash FINANCIAL RETURN ON SALES 36% flow INVENTORY VALUE $ 205,000 CASH FLOW $ 120,000

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23 Three-Dimensional Construction

Box Score

– Improve understanding of business and better decisions

– Box score is the STANDARD WORK for lean accounting

– Box score changes thinking into LEAN THINKING

GOAL: accountability & responsibility

24 Three-Dimensional Construction

Box Score

– Typically 4 measurements per section – May need to MANUALLY collect information

– Flexibility – open to change at anytime – Quantify waste in the value stream

– LEAN TRANSFORMATION: seen in cash flows

GOAL: accountability & responsibility

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25 Three-Dimensional Construction

FINANCIAL IMPACT OF LEAN: QUANTIFIABLE RESULTS – Short term: not seen in cost reduction but in capacity then revenue growth – Long term: seen in overall cost reduction – Cadence: Daily / weekly / monthly / quarterly / yearly

Get box score quickly to accelerate lean transformation

GOAL: accountability & responsibility

26 Three-Dimensional Construction

Weekly operational Weekly capacity Weekly financial results performance measurements measurements

Also shown on the value stream weekly improvement board Using resources productively Cost under control, reducing (gemba)

Want short cycles – quick for root Time spend “productively” and Revenue and profits meeting cause analysis performed within “non-productively” expectations the week

Available capacity to add to Also shown on value stream revenue - growth income statement

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27 Three-Dimensional Construction

What is the Does the financial decision make Use future 3 questions impact of the sense state if it has the box score decision? operationally? higher requires an return on answer using sales than lean principles current state What is the impact of the decision on capacity?

28 Three-Dimensional Construction

Capacity: Growth driver for lean improvements: • Eliminating waste creates capacity • Waste is defined as non-productive capacity • Capacity is not listed in the financial statements

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29 Three-Dimensional Construction

• Time spent producing to customer demand Productive Capacity • Producing more than what the customer demands is waste and not productive capacity

• Time spent on non-value added activities Nonproductive • Typical 8 wastes capacity • Goal to reduce to zero

• Capacity not currently being used Available • Time left over for more work • Opportunity for revenue growth

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Options when improving capacity

Sell more Redeploy resources to Eliminate resources • Increase profits other value streams • Not firing people but creating a • Reduce cost on one value stream strategic plan of eliminating to allow other value stream to resources in a rational manner meet demand • Do not replace people from turnover • Associating head count reduction with lean is anti-lean culture (TOXIC)

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• Lean Box Score Examples

32 Lean Box Score – Example #1

CURRENT STATE FUTURE STATE ANALYSIS SALES PER PERSON $ 7,500 ON-TIME SHIPMENT 92% FIRST TIME THROUGH 70% DOCK-TO-DOCK DAYS 30.00 AVERAGE COST $ 420.50 OPERATIONAL ACCOUNT RECEIVABLE DAYS 50.00 LEAN PRODUCTIVE CAPACITY 51% BENEFITS BY NON-PRODUCTIVE CAPACITY 30% REDUCING EMPLOYEE AVAILABLE CAPACITY 19% PRODUCTIVE CAPACITY 55% WASTE & CAPACITY NON-PRODUCTIVE CAPACITY 30% MACHINE INCREASED MATERIALS AVAILABLE CAPACITY 15% REVENUE $ 350,000 THROUGHPUT MATERIAL COSTS $ 115,000 CONVERSION COSTS $ 110,000 TOTAL COSTS $ 225,000 $ - VALUE STREAM PROFITS $ 125,000 $ -

FINANCIAL RETURN ON SALES 36% INVENTORY VALUE $ 205,000 CASH FLOW $ 120,000

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33 Lean Box Score – Example #1 Final

CURRENT STATE FUTURE STATE ANALYSIS SALES PER PERSON $ 7,500 $ 7,500 SAME ON-TIME SHIPMENT 92% 94% IMPROVED INCREASE ON FIRST TIME THROUGH 70% 78% IMPROVED QUALITY TIME SHIPMENT & DOCK-TO-DOCK DAYS 30.00 17.00 FAVORABLE QUALITY (FTY) AVERAGE COST $ 420.50 $ 415.50 FAVORABLE OPERATIONAL ACCOUNT RECEIVABLE DAYS 50.00 45.00 FAVORABLE LEAN PRODUCTIVE CAPACITY 51% 43% NON-PRODUCTIVE CAPACITY 30% 19% ELIMINATE WASTE INCREASE BENEFITS BY EMPLOYEE AVAILABLE CAPACITY 19% 38% INCREASE CAPACITY CAPACITY TO DO REDUCING PRODUCTIVE CAPACITY 55% 54% MORE WORK WASTE & CAPACITY NON-PRODUCTIVE CAPACITY 30% 17% ELIMINATE WASTE MACHINE MATERIALS AVAILABLE CAPACITY 15% 29% INCREASE CAPACITY INCREASED REVENUE $ 350,000 $ 350,000 SAME THROUGHPUT MATERIAL COSTS $ 115,000 $ 105,000 IMPROVED CONVERSION COSTS $ 110,000 $ 110,000 COST CAPACITY SAME TOTAL COSTS $ 225,000 $ 215,000 IMPROVED REDUCED SCRAP, VALUE STREAM PROFITS $ 125,000 $ 135,000 IMPROVED REDUCE COSTS, IMPROVE PROFIT FINANCIAL RETURN ON SALES 36% 39% IMPROVED INVENTORY VALUE $ 205,000 $ 120,000 IMPROVED CASH FLOW $ 120,000 $ 285,000 IMPROVED

34 Lean Box Score – Example #2 Kaizen Events

MONTHLY NUMBERS CURRENT STATE PRE-KAIZEN REPORT OUT ONE MTH THREE MTHS ANALYSIS SALES PER PERSON $ 7,500 $ 7,500 LEAN ON-TIME SHIPMENT 92% 93% FIRST TIME THROUGH 70% 72% BENEFITS BY DOCK-TO-DOCK DAYS 30.00 30.00 OPERATIONAL AVERAGE COST $ 420.50 $ 418.00 REDUCING PRODUCTIVE CAPACITY 51% 52% WASTE & NON-PRODUCTIVE CAPACITY 30% 20%

CAPACITY AVAILABLE CAPACITY 19% 28% IMPROVED REVENUE $ 350,000 $ 350,000 THROUGHP MATERIAL COSTS $ 115,000 $ 115,000 CONVERSION COSTS $ 110,000 $ 120,000 UT TOTAL COSTS $ 225,000 $ 235,000 $ - $ - $ - FINANCIAL VALUE STREAM PROFITS $ 125,000 $ 115,000 $ - $ - $ - RETURN ON SALES 36% 33%

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35 Lean Box Score – Example #2 Kaizen Events Final

MONTHLY NUMBERS CURRENT STATE PRE-KAIZEN REPORT OUT ONE MTH THREE MTHS ANALYSIS SALES PER PERSON $ 7,500 $ 7,500 $ 8,000 $ 8,500 $ 9,000 IMPROVED INCREASE ON TIME LEAN ON-TIME SHIPMENT 92% 93% 96% 98% 99% IMPROVED SHIPMENT & FIRST TIME THROUGH 70% 72% 85% 90% 92% IMPROVED QUALITY QUALITY (FTY) BENEFITS BY DOCK-TO-DOCK DAYS 30.00 30.00 20.00 15.00 13.00 FAVORABLE REDUCING OPERATIONAL AVERAGE COST $ 420.50 $ 418.00 $ 388.75 $ 363.67 $ 334.40 FAVORABLE PRODUCTIVE CAPACITY 51% 52% 62% 65% 70% IMPROVED INCREASE CAPACITY WASTE & NON-PRODUCTIVE CAPACITY 30% 20% 15% 15% 15% ELIMINATE WASTE TO DO MORE WORK

CAPACITY AVAILABLE CAPACITY 19% 28% 23% 20% 15% USING CAPACITY IMPROVED REVENUE $ 350,000 $ 350,000 $ 375,000 $ 395,500 $ 420,000 IMPROVED THROUGHP MATERIAL COSTS $ 115,000 $ 115,000 $ 123,000 $ 129,950 $ 138,000 IMPROVED CONVERSION COSTS $ 110,000 $ 120,000 $ 120,000 $ 120,000 $ 120,000 COST CAPACITY SAME IMPROVED THROUGHPUT FOR UT TOTAL COSTS $ 225,000 $ 235,000 $ 243,000 $ 249,950 $ 258,000 IMPROVED

FINANCIAL INCREASED PROFIT VALUE STREAM PROFITS $ 125,000 $ 115,000 $ 132,000 $ 145,550 $ 162,000 IMPROVED RETURN ON SALES 36% 33% 35% 37% 39% IMPROVED

36 Lean Box Score – My Example

My Personal Story: Starting from the beginning with the Lean Box Score

Project: Improve changeover time for a manufacturing cell

Issue: Production couldn’t meet customer scheduled delivery, less than 15%

Problem: Changeover time was averaging 45 hours per changeover

Target: 8 hours

Goal: Meet then beat target to meet scheduled delivery time

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37 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Discovery: • Changeover time was not tracked or accounted, no responsibility • Real changeover duration time exceeded 45 hours, not counting weekends, etc. • Target was established during a time period of three 8 hour shifts • Daily huddles didn’t visualize machines status: Changeover, Run, or Idle • Lack of expertise / flexibility for changeover • Changeover sometime require 2 operators • Cell contained 10 machines and 10 operators, lack of bench for peaks

38 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Experiment with Lean Box Score: • The box score was used to first provide understanding of the current state

• Since there was no real measurement of changeover, a manual process was created utilizing the daily team huddle and daily huddle board to apply the discipline from the communication of the daily state of changeover and production.

• Provide clarity of the key information and how the information was collected

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39 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Experiment with Lean Box Score: • Once these key elements were identified, the focus was created to produce improvement through the right drivers of the value stream or in this case the changeover process.

• Discipline and engagement were assured through positive reinforcement of the daily process with the elements of the box score to identify areas for improvement using Pareto charts, i.e. listing issue frequency from high to low with cumulative percentage for levels of exposure in the process.

40 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Experiment with Lean Box Score: • As the issues were identified for improvement, the daily huddle team corrected the issues which provided for improvement, i.e. reduction in changeover time.

• Over months of this process of daily, weekly, and monthly status, the goal of 50% reduction in changeover time was realized along with the elimination of most of the external forces preventing the reduction of changeover time (see Figure 1).

• The project is now moved to phase II for further improvement through standardization of the changeover process with another goal of 50% reduction.

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41 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Construction of the Lean Box Score: • Operation: • Looked at different measures to understand process • # changeovers per month • Time for changeover • Average time per changeover • Throughput quantity • # and % of changeovers with time and without time • # and type of causes, visualize with separate pareto chart – compared

42 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Construction of the Lean Box Score: • Capacity: • Percent usage of changeover, run time, and idle • Used to see trends if more run time utilized

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43 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Construction of the Lean Box Score: • Financial: • Calculated sales price per hour • Visualize financial impact of increasing run time

44 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Lessons Learned from using the Lean Box Score: • Decision Making. In business context, the box score’s simplified and standard view of the decision-making process allows for clarity, focus, discipline, and engagement to create a solid business foundation for value creation

• Clarity. Identification of the key information along with where the information is derived from, how the information is collected, and who is collecting the information. There is no disagreement on the data.

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45 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Lessons Learned from using the Lean Box Score: • Focus. The structure allows for the key information on the box score to drive decision making. Decision makers to rely on the box score structure to provide the necessary information to make efficient and effective decisions.

• Discipline. The box score is updated based on the refresh of the data, either daily, weekly, monthly, quarterly, or yearly. Seen from the early industrialist’s to today’s interactive Chart Rooms for top management to evaluate performance using metrics like return on investment.

46 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Lessons Learned from using the Lean Box Score: • Accountability. Organizes the responsibility for business decisions due to the recognition of people involved with the box score and the collection of the data into the box score . This 360O review process allows for the organization to continuously improve.

• Communication. Everyone in the value chain including customer to provide evidence of continuous improvement (transparency).

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47 Lean Box Score – My Example

Project: Improve changeover time for a manufacturing cell

Lessons Learned from using the Lean Box Score: • Engagement. Everyone understands the information needed to make business decisions. A common theme for teams is to “huddle at the board” to understand the favorable or unfavorable variances indicated by the box score information.

• Results. The team reduced the changeover time by 70% in 6 months.

48 Lean Box Score – Types of Box Scores

Box score for Make buy Box score capital kaizen events and decisions purchases CI projects

Box score for Impact of new weekly Box score for demand and new performance planning products reporting

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50 SUMMARY

Profit from using Lean Box Score Lean Lean – Clarity & Transparency Accounting Financials Process – Easy Implementation – Improve Decision Making

– Uses Real Numbers Lean Lean Performance – Supports the Lean Transformation Operations Measures

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THE BOX SCORE: VISUALIZING LEAN ACCOUNTING FOR EVERYONE

CONTACT: GARY KAPANOWSKI [email protected] LINKEDIN: MPLUS www.theMPlusgroup.com

SUPPORTING LEAN BOX SCORE EXAMPLES

APPENDIX FOR SLIDE #46

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53 Lean Box Score – MAKE/BUY

CURRENT STATE OUTSOURCE IN-HOUSE ANALYSIS PRODUCTIVITY $ 23,087 $ 25,301 $ 24,892 IMPROVE ON-TIME SHIPMENT 82% 78% 86% IMPROVE INCREASE ON LEAN INVENTORY DAYS 14 26 13 IMPROVE TIME SHIPMENT & FIRST TIME THROUGH 88% 82% 94% IMPROVE QUALITY (FTY)

BENEFITS OPERATIONAL BY AVERAGE COST $ 15.97 $ 16.74 $ 16.19 IMPROVE PRODUCTIVE CAPACITY 62% 62% 57% OPEN INCREASE REDUCING NON-PRODUCTIVE CAPACITY 32% 32% 28% IMPROVE CAPACITY TO DO

WASTE & CAPACITY AVAILABLE CAPACITY 6% 6% 15% HAVE MORE MORE WORK REVENUE $ 1,408,333 $ 1,543,333 $ 1,543,333 SAME IMPROVED MATERIAL COSTS $ 765,000 $ 871,425 $ 817,500 MAKE-BUY INCREASED THROUGH LABOR COSTS $ 267,083 $ 267,083 $ 276,560 MAKE-BUY INTERNAL PUT MACHINE COSTS $ 59,433 $ 59,433 $ 62,500 MAKE-BUY PRODUCTION FOR

FINANCIAL OTHER COSTS $ 74,233 $ 74,233 $ 74,233 MAKE-BUY IMPROVED PROFIT $ 242,584 $ 271,159 $ 312,540 IMPROVE PROFIT RETURN ON SALES 17.2% 17.6% 20.3% IMPROVE

54 Lean Box Score – Kaizen Events

FINANCIAL INCREASED PROFIT VALUE STREAM PROFITS $ 125,000 $ 115,000 $ 132,000 $ 145,550 $ 162,000 IMPROVED RETURN ON SALES 36% 33% 35% 37% 39% IMPROVED

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55 Lean Box Score – Capital Purchase

PROJECTED AVG NEW CAPTL AVG ANALYSIS UNITS PER PERSON 43.91 56.66 IMPROVED INCREASE ON-TIME SHIPMENT 81% 99% IMPROVED ON TIME SHIPMENT & FIRST TIME THROUGH 78% 85% IMPROVED LEAN QUALITY (FTY) DOCK-TO-DOCK DAYS 5.70 4.83 IMPROVED BENEFITS BY OPERATIONAL AVERAGE COST $ 237.74 $ 222.67 IMPROVED INCREASING PRODUCTIVE CAPACITY 43% 50% IMPROVED INCREASE NON-PRODUCTIVE CAPACITY 64% 41% IMPROVED CAPACITY TO DO MORE WORK THROUGHPUT CAPACITY AVAILABLE CAPACITY -7% 9% IMPROVED & REDUCING REVENUE $ 936,771 $ 1,316,448 IMPROVED MATERIAL COSTS $ 323,086 $ 442,209 IMPROVED WASTE IMPROVED CONVERSION COSTS $ 324,947 $ 436,383 IMPROVED THROUGHPUT TOTAL COSTS $ 648,033 $ 878,592 IMPROVED FINANCIAL VALUE STREAM PROFITS $ 288,738 $ 437,856 IMPROVED IMPROVE PROFIT RETURN ON SALES 31% 33% IMPROVED

56 Lean Box Score – Weekly Performance

Lean Operations – Weekly Performance

HOSPITAL EXAMPLE WK 1 WK 2 WK 3 WK 4 WK 5 GOAL ANALYSIS PRODUCTIVITY (HRS WORK / PATIENT VISIT) 1.97 1.58 1.66 1.75 2.05 1.73 NEED IMPROVEMENT DEFECT PER PATIENT VISIT 1.34 1.87 1.52 0.98 0.92 0.15 NEED IMPROVEMENT AVG LENGTH OF STAY (MINUTES) 62 63 58 56 57 39 NEED IMPROVEMENT PATIENT SATISFACTION (0-5) 3.1 3.3 3.8 3.6 3.6 4.1 NEED IMPROVEMENT

IMPROVE OPERATIONAL AVG COST PER VISIT $ 54.40 $ 68.22 $ 51.09 $ 54.62 $ 58.18 $ 49.00 NEED IMPROVEMENT EMPLOYEE LEAN ENGAGEMENT 33% 33% 33% 35% 35% 35% IMPROVED MENTS PRODUCTIVE CAPACITY 43% 43% 43% 44% 44% 38% NEED IMPROVEMENT NON-PRODUCTIVE CAPACITY 38% 38% 38% 32% 32% 24% NEED IMPROVEMENT

NEEDED CAPACITY AVAILABLE CAPACITY 19% 19% 19% 24% 24% 38% NEED IMPROVEMENT REVENUE $ 40,653 $ 33,877 $ 48,225 $ 45,834 $ 39,059 $ 53,000 NEED IMPROVEMENT TO MAKE LABOR COSTS $ 26,611 $ 31,635 $ 30,354 $ 29,172 $ 25,823 $ 30,000 NEED IMPROVEMENT SUPPLIES & DRUG COSTS $ 3,949 $ 3,210 $ 4,972 $ 5,377 $ 5,311 $ 5,000 ACCEPTABLE GOALS PROFESSIONAL SERVICE COSTS $ 3,999 $ 1,800 $ 3,520 $ 4,799 $ 4,599 $ 3,000 ACCEPTABLE CONTRACT SERVICE COSTS $ 1,314 $ 978 $ 1,455 $ 1,655 $ 1,207 $ 1,500 ACCEPTABLE

FINANCIAL EQUIPMENT & FACILITIES $ 2,969 $ 2,969 $ 2,969 $ 2,969 $ 2,969 $ 2,969 ACCEPTABLE TOTAL COSTS $ 38,842 $ 40,592 $ 43,270 $ 43,972 $ 39,909 $ 42,469 NEED IMPROVEMENT PROFIT $ 1,811 $ (6,715) $ 4,955 $ 1,862 $ (850) $ 10,531 NEED IMPROVEMENT RETURN ON REVENUE 4% -20% 10% 4% -2% 20% NEED IMPROVEMENT

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57 Lean Box Score – New Product

CURRENT STATE DIFFERENCE FUTURE STATE ADD CAPACITY ANALYSIS SALES PER PERSON $ 25,854 $ 1,888 $ 33,100 $ 27,742 IMPROVE ON-TIME SHIPMENT 82% 9% 91% 91% IMPROVE INCREASE ON FIRST TIME THROUGH 78% 7% 85% 85% IMPROVE TIME SHIPMENT & INVENTORY DAYS 14.00 (6.00) 8.00 8.00 REDUCTION QUALITY (FTY)

OPERATIONAL AVERAGE COST $ 17.92 $ (0.47) $ 16.68 $ 17.45 IMPROVE BY EMPLOYEE LEAN 33% 2% 35% 35% IMPROVE PRODUCTIVE CAPACITY 49% 6% 65% 55% IMPROVE INCREASE REDUCING NON-PRODUCTIVE CAPACITY 46% -12% 41% 34% IMPROVE CAPACITY TO DO

CAPACITY AVAILABLE CAPACITY 5% 6% -6% 11% AVAILABLE MORE WORK WASTE REVENUE $ 1,577,100 $ 448,000 $ 2,025,100 $ 2,025,100 IMPROVE MATERIAL COSTS $ 854,000 $ 144,200 $ 998,200 $ 998,200 N/A LABOR COSTS $ 267,058 $ 52,536 $ 267,058 $ 319,594 N/A MACHINE COSTS $ 59,436 $ 12,000 $ 59,436 $ 71,436 N/A IMPROVE PROFIT

FINANCIAL OTHER COSTS $ 74,223 $ 2,400 $ 76,623 $ 76,623 N/A PROFIT $ 322,383 $ 236,864 $ 623,783 $ 559,247 IMPROVE RETURN ON REVENUE 20% 7% 31% 28% IMPROVE

58 Lean Box Score - Planning

REMOVE INCREASE INSOURCE CURRENT STATE FUTURE STATE UNEEDED SALES SUB-ASSY ANALYSIS INCREASE SALES PER PERSON $ 7,500 $ 7,500 $ 8,493 $ 9,904 $ 7,400 SAME SALES ON-TIME SHIPMENT 92% 94% 94% 94% 95% IMPROVED PRODUCES FIRST TIME THROUGH 70% 78% 78% 78% 78% IMPROVED QUALITY BETTER PRODUCTION DOCK-TO-DOCK DAYS 30.00 17.00 9.00 9.00 13.00 FAVORABLE AVERAGE COST $ 420.50 $ 415.50 $ 399.17 $ 375.50 $ 385.00 FAVORABLE OPERATIONAL LEAN ACCOUNT RECEIVABLE DAYS 50.00 45.00 50.00 50.00 50.00 FAVORABLE PRODUCTIVE CAPACITY 51% 43% 64% 60% 62% BENEFITS NON-PRODUCTIVE CAPACITY 30% 19% 27% 24% 22% ELIMINATE WASTE INCREASE BY EMPLOYEE AVAILABLE CAPACITY 19% 38% 9% 16% 26% INCREASE CAPACITY SALES USES PRODUCTIVE CAPACITY 55% 54% 59% 69% 69% CAPACITY CAPACITY NON-PRODUCTIVE CAPACITY 30% 17% 19% 20% 20% ELIMINATE WASTE

REDUCING MACHINE MATERIALS AVAILABLE CAPACITY 15% 29% 22% 12% 11% INCREASE CAPACITY WASTE REVENUE $ 350,000 $ 350,000 $ 350,000 $ 500,000 $ 350,000 SAME MATERIAL COSTS $ 115,000 $ 105,000 $ 105,000 $ 130,000 $ 100,000 IMPROVED INCREASED CONVERSION COSTS $ 110,000 $ 110,000 $ 105,000 $ 115,000 $ 110,000 COST CAPACITY SAME SALES TOTAL COSTS $ 225,000 $ 215,000 $ 210,000 $ 245,000 $ 210,000 IMPROVED IMPROVES VALUE STREAM PROFITS $ 125,000 $ 135,000 $ 140,000 $ 255,000 $ 140,000 IMPROVED HIGHEST

FINANCIAL RETURN ON SALES 36% 39% 40% 51% 40% IMPROVED RETURN ON INVENTORY VALUE $ 205,000 $ 120,000 $ 80,000 $ 65,000 $ 120,000 IMPROVED SALES CASH FLOW $ 120,000 $ 285,000 $ 130,000 $ 160,000 $ 285,000 IMPROVED