Issue 4 Volume 2 | May 2012 | www.leanmj.com
All will be weighed and measured Understanding lean assessment methods.
IN THIS ISSUE: The Shingo model for operational excellence: Bob Miller discusses the Shingo model and explains how firms can use it to assess their performance while aspiring to company-wide improvement.
The central nervous system of lean: Matt van Wyck looks back at its experience with designing an improvement programme for DeBeers.
Take company uniqueness into account: Stay away from prescriptive approaches to lean accounting. John Darlington on the risks of adopting methods that are recognised as successful but do not necessarily match the characteristics and needs of a business.
Unstoppable: This month LMJ attends the Lean Management Summit in Amsterdam and meets some of the best companies presenting there, for the It’s a lean world special on the Netherlands.
Critical Initiative Support: improving operations in Afghanistan: Tim Clancy and Adam Sommers of IBM Global Business Services explain how Critical Initiative Support can help bring change about in difficult situations where results are needed quickly.
The Lean Management Journal is supported by the Lean Enterprise Research Centre, Cardiff Business School welcome to the lean management journal
Dear reader, We are all familiar with the adage ‘you can’t improve what you can’t measure’. There is no doubt methods to assess lean programmes can be a valuable tool for a company to understand where issues, and therefore opportunities for further improvement, lay.
It is also true, however, that hoping that just any assessment method will be easily adaptable to an organisation’s specific characteristics is naive and dangerous. Think about this, as an example: how often do we hear people say, “We have introduced the Toyota Production System into our operations”? Correct me if I am wrong, but there is a Editorial reason why it is called the Toyota Production System. At page 12, Kate Mackle stresses Commissioning editor the importance of understanding your business before turning to measurement tools Roberto Priolo [email protected] for guidance, while John Darlington (page 20) warns against the “blind” adoption of Editorial director accounting methods that were designed for companies that may be very different to your John Bicheno own. Once again, focusing on the tools without considering the bigger picture can end up [email protected] inflicting great damage, as does failing to realise the uniqueness of each company. Contributors Tim Brown Sub-editor At page 7, Bob Miller of the Shingo Prize for Operational Excellence talks about what is [email protected] largely viewed as the most comprehensive assessment tool available.
Last month, LMJ attended the Lean Management Summit in Amsterdam and spoke to Design some of the most interesting companies that presented at the event. Their stories are told Art Editor in this month’s It’s a lean world section (page 30), which looks at lean in the Netherlands Martin Mitchell [email protected] and paints the picture of a country where the principles of continuous improvement have Designers been applied to realities that are very different from manufacturing. Ever heard of lean in Viicky Carlin, Alex Cole [email protected] elementary schools?
In this month’s special feature, LMJ analyses a system for improving operations in difficult In order to receive your copy of the Lean Management scenarios – specifically Afghanistan – where there is a need to act and achieve results Journal kindly email b.walsh@ sayonemedia.com, telephone quickly (page 38). 0207 4016033 or write to the address below. Neither the Lean Management Journal or SayOne There is a lot going on at the journal these days and I would like to take this opportunity Media can accept responsibilty for omissions or errors. to welcome Gwendolyn Galsworth as the newest member of the LMJ Editorial Board. Gwendolyn – who will speak at this month’s LMJ Conference – is a visual workplace Terms and Conditions Please note that points of expert and Shingo-award winning author. She is the president of Visual Thinking Inc. view expressed in articles by contributing writers and in and of the Visual-Lean Institute. Her incredible knowledge and experience, as well as her advertisements included in this journal do not necessarily ability to connect and engage with the people she works with and speaks to, make her a represent those of the publishers. Whilst every effort is made to great addition to the board. ensure the accuracy of the information contained in the journal, no legal responsibility will We are receiving extremely positive feedback on the journal from readers around the be accepted by the publishers world and I would like to thank you all for your ongoing support and interest in LMJ. We for loss arising from use of information published. All constantly strive to further develop the journal and bring you more quality content and rights reserved. No part of this publication may be reproduced interesting case studies. We will soon have a brand new website, and the LMJ e-bulletin or stored in a retrieval system or transmitted in any form or by will also be launched in the coming weeks. any means without prior written consent of the publishers. Happy reading,
Commissioning Editor, Roberto Priolo
2 contents maY 2012 co n te ts 04 Lean News 36 The Fifth Column This regular column, written by John Bicheno, aims to 05 Introducing the editors provoke debate on some of the most interesting and controversial topics in lean. 06 Knowing where you are John Bicheno introduces this issue of LMJ, which focuses on measurement and assessment. 38 Special feature Critical Initiative Support: improving operations Principles & purpose in Afghanistan Tim Clancy and Adam Sommers of IBM Global 07 The Shingo model for Business Services explain how improvement operational excellence initiatives like the Critical Initiative Support can help bring change about in difficult situations where Bob Miller talks about The Shingo Prize model for results are needed quickly. operational excellence, explaining how companies can use it to benchmark themselves against best practice in their bid to achieve change. 42 Lean diary 12 Think flow: why lean assessments Safety matters most don’t work In this column, LMJ observes the lean journey Without a deep understanding of a business’ of Serbian manufacturer SCGM. Director Sandra core problems and processes, assessment Cadjenovic shares the most recent update on cannot be used to establish the status of lean the company’s progress in its continuous in the organisation, says Kate Mackle, founder improvement programme. of Thinkflow.
16 The central nervous system of lean 45 LMJ in conference Matt van Wyck looks back at what he learnt This section features reviews of the events LMJ at DeBeers as he designed and developed a attends. Find out what goes on in the lean community programme for transforming the company’s by reading about some of the most interesting South African operations. conferences and seminars.
20 Take company uniqueness into account 46 Book review John Bicheno’s The Service Systems Prescriptive approaches to lean accounting can Jacob Austad reviews Toolbox end up damaging a company that might not , PICSIE Books. operate in the same situation those approaches were designed for, as well as the reputation of lean, explains John Darlington. 47 Letters and comment Contributions in this issue come from Joseph Paris, 25 Integration: the way forward for chairman of XONITEK, who shares his view on the supply chain need to steward CI programmes to make them Shane Maher MBA shares with LMJ a research successful; and from Roddy Martin of Competitive on the latest thinking on supply chain Capabilities International, who draws the conclusions integration and provides a case study on a on how a company can fully transform its supply manufacturer of medical devices. chain and make it a demand-driven system.
30 It’s a lean world 50 Events Unstoppable Find out about the best lean events coming If you think lean is difficult to adapt to non- your way. manufacturing businesses, think again. This month, LMJ travels to the Netherlands to study the application and status of lean thinking in the country, and finds a wide adoption of continuous improvement in businesses from several different sectors, including healthcare, financial services and... elementary schools!
Elizabeth House, Block 2, Part 7th Floor, 39 York Road, London, SE1 7NJ T +44 (0)207 401 6033 F + 44 (0)207 202 7488 www.sayonemedia.com. Lean management journal: ISSN 2040-493X. Copyright © SayOne Media 2012. www.leanmj.com | May 2012 3 LMJ
A new website for Big Apple better service BIS publishes might turn figures on to lean to Mobile accessories retailer MobileFun upgraded apprenticeships improve its international websites to improve customer water experience and boost sales. A new shopping The Department for Business, services basket and checkout and a model selector Innovation and Skills has reported that widget are among the improvements made to there have been 256,500 recent new the company’s five websites in the UK, Germany, apprentices. The figures cover the New York City will partner France, the Netherlands and Spain. Other new academic year between August and with Veolia Water, a features include navigation by attributes, a new January. Most of the new recruits were specialist in outsourcing image gallery including video, the ability to individuals of 25 or older. Some 100,300 water services for pay in different currencies, through alternative fell into this category (which covers by municipal authorities, to payment methods and provide reviews in far the largest age range), compared evaluate the performance different languages. “With our continuous to 79,100 who were 18 or younger. of its drinking water and improvement programme in place, new website Those between 19 and 24 made up the wastewater systems, features are rolled out every two weeks, so we final group of 77,100. Skills minister which serve nine million are constantly innovating,” said Mark Riley, head John Hayes said: “It is particularly people. The first phase of of marketing. encouraging to see the large number of the partnership will result apprenticeships for younger people.” in recommendations being made to improve University performance and reduce hospital staff visit operating costs. NYC will manufacturer then decide whether to appoint Veolia Water Siemens Healthcare Diagnostics Manufacturing Toy manufacturer to implement the has shared its experience of lean business to make packaging recommendations in processes with the Histopathology department leaner order to optimise the of Whipps Cross University Hospital NHS performance of the Trust in Greater London. A delegation of Hasbro will reduce the materials used in services, improving approximately 30 Whipps Cross staff visited product packaging for many of its highly popular their productivity and the Suffolk plant which designs and assembles global brands. This project will result in a 15% efficiency levels. The a number of point-of-care instruments. The improvement in the average product-to-package contract would enable visit demonstrated how lean practices have ratio of brands and products included in the the Department of been implemented by the company in a initiative. Over the next two years, retailers and Environmental Protection production environment to achieve continuous consumers will begin to see a range of packaging to achieve annual savings cost and time savings. Pathology departments efficiencies put in place, including redesigned of between $100m to have been increasingly implementing lean disposable boxes and blister packs that use $200m on operation to improve the quality, efficiency and safety less material. As an example, a more efficient and maintenance costs. of their services. The Whipps Histopathology package design for the 2013 My Little Pony Through its DPE, the Department, supported by NHS Improvement, assortment pack is expected to reduce the size city has launched an has experienced substantial improvement in of shipping containers by 20 percent, creating operational excellence service to patients. transportation efficiencies. programme.
If you have any news that you think would interest and benefit the lean community please let us know. Send submissions to the commissioning editor Roberto Priolo: 4 [email protected] Introducing your Brenton Harder editors Credit Suisse
Articles for LMJ are reviewed and audited by our experienced editorial board. They collaborate on comment against articles Professor and guide the coverage of subject matter. Zoe Radnor Cardiff Business School
Jacob Austad LeanTeam, Denmark
Ebly Sanchez Volvo Group
Bill Bellows Pratt & Whitney Rocketdyne Peter Watkins GKN
John Bicheno Lean Enterprise Research Centre, Cardiff Business School Wendy Wilson Warwick Manufacturing Group, University of Warwick
Norman Bodek PCS Press
Dr Keivan Zokaei SA Partners
Gwendolyn Galsworth Visual Thinking Inc. More information on our editorial board, their experience, and views on lean is available on the LMJ website: www.leanmj.com
www.leanmj.com | May 2012 5 INTRODUCTION WRITTEN BY John Bicheno
Knowing where you are
This month we focus on wo of the articles here reflect Used well, this can reveal areas of assessment frameworks. Kate weakness and opportunity. measures and assessment. T Mackle’s focus is on flow, Assessments have become particularly on creating flow, organising However, there are cautions. The first is for flow, and maintaining flow. This where an assessment framework is seen very fashionable in balance between the three aspects is by senior management as ‘the way to do lean, following on from most welcome – too often there is an lean’. Easy: just delegate responsibility over-emphasis on maintaining activities to each department for driving up established quality and such as 5S, standard work, and six performance against the appropriate management frameworks sigma – but to the detriment of creating criteria. The second is appropriateness. A flow. Likewise, organising for flow has framework is supposed to be a ‘systems’ such as the EFQM often received much less emphasis than view for guidance. All too often it business excellence model it deserves. becomes a point-chasing exercise where the objective for individual managers and, for US companies, The Shingo Prize, long established in is to increase their scores by following the Baldridge. the USA, and now being increasingly the standard criteria. Unfortunately, the taken up in UK and Ireland, is widely whole is more than the sum of the parts. recognised as the most comprehensive There is no escaping top management assessment framework. A strong feature responsibility for lean success – going to is the three level assessment of tools, the gemba, thinking through end-to- systems, and principles. In other words, end performance, PDCA, mentoring, a mastery of the lean tools is only the management by asking questions, beginning – integration of the tools is understanding the needs of tomorrows’ required, and then ‘living’ the principles. customers, and translating those needs into strategy. The best way of using assessment frameworks is to gain a balanced No-one ever won a race by standing on appraisal of the status of lean at a site. the sidelines with a stopwatch.
6 principles & purpose principles & purpose
The Shingo model for operational excellence
Bob Miller is the executive director of The Shingo Prize for Operational Excellence at Utah State University. In this article, he explains how companies can use the Shingo model to benchmark themselves against best practice and aspire to real organisation-wide change.
he search for improvement is instinctive. To be successful in the long term, businesses and T indeed any organisation must be engaged in a relentless quest to make things better. Failure to make this an organisational priority will inevitably result in organisational decline. Excellence must be the pursuit of all great leaders. In fact, the passionate pursuit of perfection, even knowing it is fundamentally impossible to achieve, brings out the very best in The values of a corporation, every human being. not grounded in enduring Improvement is hard work. It requires great leaders, principles, are largely ineffectual smart managers and empowered people. Improvement in influencing the creation of a cannot be delegated down, organised into a programme consistent organisational culture or trained into the people. Improvement requires more than the application of a new tool set or the power of a charismatic personality. Improvement requires the transformation of a culture to one where every single person is engaged every day in most often small but, from time to time, large change.
www.leanmj.com | May 2012 7 The Shingo model for operational excellence Bob Miller
In reality, every organisation is naturally in some Principles govern everything that happens in the natural state of transformation. The critical question is, to world. Scientists the world over continually search what end is the organisation being transformed and to understand more of the principles that govern the who are the architects of the transformation? The universe. They do not invent them; they only discover Shingo model of operational excellence asserts that their existence and seek to do good by taking purposeful successful organisational transformation occurs when action based on knowledge of the guiding principle. leaders understand and take personal responsibility for Principles govern the laws of science; they determine the architecting a deep and abiding culture of continuous consequences of human relationships and, ultimately, improvement. This is not something that can be principles influence the successful outcome of every delegated to others. As the CEO of a very successful business endeavor. Similarly, the values of a corporation, organisation recently said, “Leaders lead culture.” not grounded in enduring principles, are largely ineffectual in influencing the creation of a consistent A culture built on organisational culture. correct principles Dr. Stephen Covey describes principles as fundamental truths. He defines a principle as a natural law that is universally understood, timeless in its meaning and The Shingo Prize has made a fundamentally inarguable because it is self-evident. diligent search of thought leaders over Covey teaches that values govern our actions and the last 100 years. Their work has principles govern the consequence of our actions. been carefully analysed and dissected Values are cultural, personal, interpretable and variable. and the unique concepts or principles Our personal values influence how we see the world from each have been extracted and ultimately our choices for how to behave. Principles govern the outcomes of our choices. In other words, the values of an unprincipled person will very likely lead to behaviors that have negative consequences. Why operational excellence? Figure 1. Principles of operational excellence (The Shingo House) For decades we have watched, and all too often experienced, the disappointing efforts of programmatic improvement initiatives, leaving in their wake a trail of Results unintended negative consequences; rarely resulting in lasting improvement. Quality circles, just-in-time, total Measure what matters Align behaviours with quality management, business process re-engineering, performance six sigma, and most recently lean are a few illustrations Create value for the customer Identify cause and effect relationships of well intentioned initiatives that have far under- delivered on there promised benefits. Our study of these Enterprise alignment Create constancy See reality programmes over the last 25 years has led us to believe of purpose Focus on long-term that the problem has nothing to do with the concepts Think systemically Align systems Slign strategy and everything to do with the programmatic, tool Standardised daily managment oriented deployment of them. Supply Management The Shingo model for operational excellence is based on a systematic study of each of these improvement Operations Customer relations initiatives. Our approach bypasses the tools that each Focus on process Stabilise processes Embrace scientific thinking Product Relay facts and data programme has engendered and focuses rather on Flow and pull value and service Standardise processes the underlying/guiding principles and supporting key Assure quality at the source development Insist on direct observation Seek perfection Focus on value stream concepts behind them. We recognise the necessity of Keep it simple and visual Identify and eliminate waste good improvement tools but focus on them only within continuous No defects passed forward the context of enabling a system to better drive ideal, process Integrate improvement with work principle based behaviors. The Shingo “House” (Figure 1) improvement provides a summary and categorisation of this collection of guiding principles and supporting concepts. cultural enablers Lead with humility Assure a safe environment When taken in their totality, these timeless principles Respect every individual Develop people Empower and involve everyone become the basis for building a lasting culture of excellence in the execution of one’s mission statement. guiding principles supporting concepts We call this relationship between business results
8 The Shingo model for operational excellence Bob Miller principles & purpose
and principle based behavior operational excellence. Supporting concepts are critical to pay Operational excellence cannot be a programme, attention to but may not stand up to the another new set of tools or a new management fad. It rigor of being universal, timeless and self- is the consequence of an enterprise-wide practice of evident as are the principles. ideal behaviors, based on correct principles. As long as improvement is seen as something outside the core work The dimensions are the result of of the business, as long as it is viewed as “something else ‘thinking categorically about the to do”, operational excellence will remain elusive. principles.’ It is clear that all four dimensions of the model require focus When leaders anchor the corporate mission, vision and in order to achieve excellence. In the values to principles of operational excellence and help same way that we need to comprehend associates to connect and anchor their own values to the For objects in three dimensions to truly same principles, they enable a shift in the way people appreciate all of their characteristics, think and behave. Changing the collective behaviour organisations operational excellence must be viewed of the group changes the culture. This is a leadership to be in these four dimensions in order to fully responsibility that cannot be delegated. successful appreciate the power of the principles to affect business outcomes. In his book Key Strategies for Plant Improvement, over the long Shigeo Shingo said, “Think in terms of categorical term, leaders Transforming a principles.” The Shingo House is a categorisation of the must deeply culture – Shingo guiding principles of operational excellence. Associated and personally with each category are also listed many important transformation supporting concepts. understand process the principles Many organisations and their leaders are The principles are categorised into four dimensions: that govern coming to understand that sustainability cultural enablers, continuous process improvement, their success. requires focusing on the culture; that’s enterprise alignment, and results, the ultimate end of all Further, they the easy part. The difficult part is knowing business initiatives. These four dimensions overlay five how to really affect a change. core business systems – product/service development, must ensure customer relations, operations, supply – and a variety of the behaviors The Shingo transformation process is a management or administrative support systems. of every methodology for accelerating a personal and enterprise-wide transformation Guiding principles person who contributes to to a culture of operational excellence. The Shingo Prize did not create the ten guiding principles The process is based on the teaching of of operational excellence, but rather they have always the business Dr. Shigeo Shingo who recognised that existed. In truth, there is ample evidence that these are in harmony business improvement came through principles have been well understood, more or less, at with these understanding the relationship between different times for thousands of years. As the world has principles. principles, systems and tools. gone through cycles of advancement and decline, it seems these principles are routinely lost and forgotten In short, the Shingo understood that operational and must be re-discovered. Emerging from the dark ages organisational excellence is not achieved by superficial into a period of enlightenment and industrialisation, the culture they imitation or the isolated and random impact of these principles are only now beginning to be build must use of tools & techniques (‘know how’). understood again. Instead, achieving operational excellence be grounded requires people to ‘know why’ — for Certainly and even surprisingly, business schools do not in correct example, an understanding of underlying emphasise these principles even though they are the principles principles. drivers for business execution excellence. The cause for this may be that these fundamental business principles In the 1940s, the work of French social have been disguised in management fads and tool boxes scientist Piaget led us to understand that that become programmes or “flavors of the month”. learning occurs when people come to deeply understand the meaning behind The Shingo Prize has made a diligent search of thought the methodology. People naturally search leaders over the last 100 years. Their work has been first for meaning, the principle, and then carefully analysed and dissected and the unique concepts attempt to organise them somehow into or principles from each have been extracted. Compiling, a system, or some kind of order. Finally, distilling and prioritising the list led to the 10 guiding they create tools to better enable the principles on the left side and the supporting concepts systems to accomplish the purpose for for each dimension on the right side of the house. which they were created.
www.leanmj.com | May 2012 9 The Shingo model for operational excellence Bob Miller
consequence of our leadership and management behaviours. An example Individual may help. focus If we encourage, enable or simply allow a CORE VALUES ANCHORED TO culture to emerge where employees are GUIDING PRINCIPLES thought of merely as an unfortunate cost Align burden, or that the smartest people are Affirm those that rise to the top, the consequence Organisational Drive will be a workforce that is not fully Drive focus engaged, ideas for improvement are never articulated and acted on, people feel unfulfilled in their work and turnover is very high. Labor costs become excessively RESULTS CULTURE SYSTEMS high, business systems stagnate, and (Behavioral innovation is not fast enough to compete evidence) in a rapidly changing business climate.
When people understand principles for Refine themselves, the “why”, they become empowered to take personal initiative. Achieve Enable Leaders who teach associates the Select principles behind the tactics or the tools TOOLS can be confident that innovation from each individual will be pointed in the right direction. It is not necessary for a leader to define ideal behaviours for others. If the principle is truly a principle, diverse people with different values even, will readily be able to define ideal behavior for themselves and be very consistent Learning and teaching the with others. principles Dr. Shingo understood this and taught The first step a leader must take in leading cultural transformation that the primary role of a leader is is a personal journey to understand what each of these guiding to drive the principles of operational principles mean conceptually and then what they mean personally. excellence into the culture. It is impossible for a leader to lead the development of a principle- based culture until he or she has gone through the deep reflection Aligning the required to begin a personal transformation. This is no trivial task. For many and perhaps most, fully embracing these principles requires systems with a fundamental re-thinking of the rules of engagement used to get to principles where they are. All work in organisations is the outcome of a system. Systems are either designed At a minimum, leaders must be curious enough to experiment with the to produce a specific end goal or they principle. John Shook at the Lean Enterprise Institute taught us that it evolve on their own. Systems drive is often impossible to “think our way into a new way of acting”. Rather, the behavior of people; or rather they guided by correct principles, what we should do is to do, observe, learn create the conditions that cause people and then do something else, until we “act our way into a new way to behave in a certain way. One of the of thinking”. By carefully analysing the cause and effect relationship outcomes of poorly designed systems is between principles and results, a leader will begin to shift their own enormous variation in behaviour or even beliefs about what drives optimal business performance. After gaining consistently bad behaviour. Variation in this new insight it becomes the effective leader’s primary responsibility behaviour leads to variation in results. to see that others in his/her organisation have experiences where they Operational excellence requires ideal can gain the same insight. behaviour that translates into consistent and ideal results. Leaders who choose to disregard the principles that govern business outcomes do so at great risk. Whether we acknowledge them or The Shingo transformation process not, the principles of operational excellence always govern the illustrates the critical need to align
10 The Shingo model for operational excellence Bob Miller principles & purpose
every business, management and work system of become more oriented towards driving the organisation with the principles of operational principles and culture while managers’ excellence. When systems are properly aligned with focus becomes more on designing and principles, they strategically influence people’s behaviour aligning systems to drive ideal principle- toward the ideal. based behaviour.
Shingo also taught that the primary role of managers The ultimate mission of The Shingo must shift from fire fighting to designing, aligning and Prize is to assist organisations of all improving systems. kinds in building operational excellence. The Shingo model may be used as The enabling role of a benchmark for what excellence at improvement tools the highest level should look like. It A tool is nothing more than a point solution or a specific may be used to align all elements of means to a specific end. Shingo referred to tools as an organisation around a common techniques for problem solving; necessary but not set of guiding principles and a proven sufficient. He taught that tools should be selected to methodology for transformation. Some enable a system to perform its intended purpose. In use the Shingo model as the basis many ways, a system may be thought of as a collection for organisational assessment and of tools, working together to accomplish an intended improvement planning. A few use the outcome. A successful enterprise is usually made up of Shingo model as a way to recognise complex business systems that can be further divided their associates for excellent work and into layers of sub-systems, each having embedded in others use it to demonstrate to current them the necessary tools to enable a successful outcome. and prospective customers that they can compete with anyone in the world. Some Perhaps the largest mistake made by corporations use the Shingo model for all of the above. over the last three or four decades has been the inappropriate focus on a specific tool set as the basis for their improvement efforts. Tools do not answer the question of “why”, only the question of “how”. Knowing The Shingo transformation process the “how” without fully understanding the “why” leaves illustrates the critical need to align every people waiting for instructions and powerless to act on business, management and work system their own. Organisations can never sufficiently release of the organisation with the principles of the full potential of their people by creating a tool- operational excellence oriented culture. Experiment with the principle The real Shingo Prize, however, is One of the principles of operational excellence is represented by the business results that scientific thinking, which is intended to foster a culture come from the relentless pursuit of a of experimentation and deep learning. People must be standard of excellence that is without able to put to the test each of the principles espoused question, the most rigorous in the by the principle-based leader. Only when people see world. Those who use the Shingo model for themselves the cause-and-effect relationship of will embark on a journey that will results relative to the principle, will they come to accelerate the transformation of their deeply understand the value of the principle to them organisations into powerful, dynamic, personally. Repetition through many cycles of learning nimble competitors. in the experiment gives people a personal insight about the principle and empowers them to make personal No obstacle – affordable healthcare, judgments about its validity. efficient transportation, emerging global environmental concerns – will Summary be beyond the reach of those who Operational excellence is end game of all organisations embrace principles of operational focusing on continuous improvement. Programmes, excellence and make certain that every titles, tools, projects, events and personalities are person in their extended value stream insufficient to create lasting change. Real change is deeply understands the principles only possible when timeless principles of operational behind the tools. excellence are understood and deeply embedded into culture. The focus of leaders must change to Visit us at www.shingoprize.org
www.leanmj.com | May 2012 11 principles & purpose
Think flow:
Kate Mackle, founder of why lean Thinkflow Limited, talks about the importance of understanding the problems of a company assessments before assessment can even hope to represent a useful to tool to measure how well the don’t work business is doing.
magine the scene. You enter the doctor’s consulting room. “What seems to be the I trouble?” he says. You answer: “Well, I’ve been feeling very listless. Not as energetic as I usually am. And I’ve had one or two dizzy spells.” He asks: “How long have you been taking one aspirin a day?”; “how many marathons have you run in the last 5 years?”; “When do you aspire to move from Valium to Prozac?”
If you were a particularly reflective individual, sometime after running from the surgery in shock, you might ponder to yourself: “Why did he jump straight to assuming certain drugs were the answer, before he even knew what was wrong with me? And why did he presume such extreme exercise was appropriate when he could clearly see that I’m a stranger to the gym?”
In short, you’d think: “Why didn’t he diagnose what was wrong with me before jumping to conclusions?”
Google “lean assessment” Thankfully, we’ve got the Medical Council to protect and you’ll find 33 million hits for us from such bizarre behaviour from those who are this sort of thing: that’s a lot of responsible for looking after our health. Unfortunately, no such body exists to sanction those who seek to advise anecdotal evidence that there’s a us on how to improve our companies. They are free to receptive audience who believe in pedal endless derivatives of “lean assessment tools”, the worth of such assessments – or each purporting to help identify where we are on the that there’s a healthy industry in lean journey and what we need to do more of to help us on the way. promoting this idea
12 principles & purpose
You know the type of assessment I’m talking about. Score yourself from The 1 to 5 on your application of the lean toolbox. Score 1 for carrying out a importance value stream map on one product family; score 5 for mapping all your value streams. Score 1 for having a model 5S area; score 5 for 5sing the of whole plant. And so on. sequence One of the major Google “lean assessment” and you’ll find 33 million hits for this sort of weaknesses of thing: that’s a lot of anecdotal evidence that there’s a receptive audience conventional lean who believe in the worth of such assessments – or that there’s a healthy assessments is the industry in promoting this idea. absence of reference to sequence: where to These are all great tools and very effective when used selectively, but start and what conditions where’s the diagnosis of the need? Where’s the judgement that to make do you need to have in the necessary change at this point in developing a lean system, this is the place for the next stage appropriate intervention to make? of development. Instead, all tools are seen as Assessments by definition require a standard to assess against. This equally useful at all times means that “lean assessments” purport to tell you how “lean” you which leads to premature are against some sort of standard of best practice. This betrays the attempts to use tools thinking that somehow the state of “being lean” exists independently which the environment is from your business type, circumstances and environment. This is Many not yet ready to support equivalent to believing that there is a standard of good health which of the tools or exploit. we can assess people against irrespective of age, gender and socio- economic conditions. in the lean For example, trying toolbox help to use 5S to maintain Even worse, the degree of attainment against this “lean standard” us standardise, workplace organisation is equated with the extent to which various tools and techniques communicate in a plant where the have been applied: typically, these tools are those which have assembly schedules are been popularised by their use in repetitive component assembly and solve constantly interrupted by environments and are largely irrelevant to businesses operating in a problems: parts shortages: having complex low volume-high variety environment. they help us a nicely-painted square to be more where you put the jobs The brutal truth is that if you assess yourself against a model that tests effective in awaiting parts is not for application of tools, you will be sucked into unthinking programmes lean. It is no coincidence of tool deployment. It’s a dangerous path to tread because you think organising our that people often have you’re doing the right thing and can spend an enormous amount of daily work and difficulty in sustaining 5S: time and effort getting a better score on the assessment grid, blissfully continuously it is a tool for visualising unaware that it’s made absolutely no difference to the business’ ability improving how and maintaining the to win orders and make money. standard flow of work we do that – it cannot create order work. where none exists. The Thinkflow implementation framework Similarly, you need to Create flow Maintain flow Organise for flow know where to focus your loss reduction Design processes Ensure the flow Enable the activities: where do we to deliver real of value to the organisation have the greatest need value to the customer is to respond to to improve availability customer continuous problems with the and reduce variation? flow of value Doing a SMED activity on a non-constraint may be the right thing to do in a mature lean system if you want to reduce the lead Measure for flow time after the constraint: it’s not going to have Measures to promote customer service any benefit if you’re not Flow accounting to support financial goals even managing the flow through the constraint.
www.leanmj.com | May 2012 13 Think flow: why lean assessments don’t work Kate Mackle
Where the tools fit It’s a testament to the belief in lean and the power of the results achieved Create flow Maintain flow Organise for flow that managers persist in trying to do the “right thing” instead of telling their lean Tools for Tools for Tools for advisors to shove it while they get on understanding availability standardisation, with saving the business. In fact, more demand, capacity improvement communication intolerance of facile solutions would and material and variability and problem help the whole lean movement to get planning and reduction solving real: what managers need is a fast way scheduling to get better insight into the cause of their problems and an effective way of designing and implementing the solution.
Measure for flow Practical solutions emerge from applying thought and effort in conditions of real Tools for defining measures linked to the overall company goal need: ironically, that’s one lesson from Flow accounting for financial information about real money Toyota’s experience that we don’t hear much about – maybe because no-one has given it an exotic-sounding Japanese name. I could call it “GANBATTE” and make a fortune marketing it but instead We need to ensure that everyone knows I’m going to share with you an approach that’s emerged out of years of experience how the system should work, how it’s performing of lean implementation. and how to resolve the problems that arise: we need to give people a context for continuous Joking aside, it’s a serious question: why improvement and the skills to solve problems in a are we performing so badly and how can we improve? You can answer that sustainable fashion question once for businesses but if you don’t develop their thinking to be able to ask and answer the question again and Many of the tools in the lean toolbox help us standardise, communicate again and again, they won’t be capable and solve problems: they help us to be more effective in organising our of sustainable continuous improvement daily work and continuously improving how we do that work. Other tools – particularly when the performance no help us improve availability and reduce variation: they help us make longer looks “so bad”. Faced with that the process more reliable so that the flow of value to the customer is challenge, a framework emerged over maintained. There’s nothing inherently wrong in using these tools for time that has proved useful in helping their own sake – if you can afford the luxury to do so. organisations diagnose the causes of their underperformance and design Most organisations can’t: they need to know the most important effective programmes to implement improvement activities to do now with the limited resource available. They improvements. It’s a simple way of need to know what changes to make to the business to improve service, addressing the vital questions: where to to be able to reliably take on new orders, to free up cash from inventory, start and what to do? to reduce operating costs without jeopardising sales, to invest with confidence. They need to know what improvements will have a fast and It’s called the “Thinkflow framework” sustainable financial benefit. They won’t get this from lean assessments. because it does exactly what it says on the tin: if you “think flow” you will The answers to these pressing questions lie in understanding how be led down the correct path towards the business could be more effective in matching its capacity and improvement. However, just saying procurement to the demand of the customer. Get these decisions “think flow” would have been impossibly wrong and you’ll find yourself in the uncomfortable position of inscrutable from someone who clearly having taken on orders you can’t fulfil on time, tying up cash in was not a Japanese sensei so the inventory that’s not moving, with a headcount and costs that look framework expands on the key elements untenable. Lean assessments are weak in this area because the of “thinking flow”. whole of the lean movement treats demand, capacity and inventory management with a woeful simplicity. Turn to a lean assessment for There are four parts to the framework: direction and you’ll find yourself challenged as to how much you’re Create Flow, Maintain Flow, Organise using kanban and pull systems: you are taking the cure before you’ve for Flow and Measure for Flow. In a real even understood your diagnosis. application, each part would be formed
14 Think flow: why lean assessments don’t work Kate Mackle principles & purpose
of questions to guide diagnosis and that everyone knows how the system should work, how it’s performing then to direct the design of solutions and how to resolve the problems that arise: we need to give people a (that’s the part where the selective use context for continuous improvement and the skills to solve problems of the lean tools comes in). A degree of in a sustainable fashion. This is the purpose of many of the tools in the customisation is required to make the lean toolbox: they help the organisation deal with problems that stop framework relevant to the characteristics the flow of value. In the framework, this is called Organise for Flow and of the business but for the purposes of deciding what’s needed in this area stems naturally from the system this article, the generic approach will be design decisions taken in the Create and Maintain Flow areas. described. Having worked through Create, Maintain and Organise flow, a business It starts with “Create Flow”. This requires will have diagnosed the causes of the underperformance in their current a thorough understanding of how the state and identified the major changes needed to design a future state. business manages the fulfilment of In doing so, they will have recognised the potential benefits of change customer demand: how effectively are and realised where current policies and measures are out of alignment the planning and scheduling systems with a focus on the flow of value to the customer. In the last part of the working? When we understand why framework, Measure for Flow alerts the business to any measures which these processes are not working, we’ve diagnosed the underlying cause of failure Measuring the financial effect to give the customer what they want, when they want it: we’ve also understood Create flow Maintain flow Organise for flow why we don’t have the right material or resources at the right time. Out of this Strong link with: Some link with: Some link with: understanding emerges the definition of what needs to be changed to make Throughout Inventory Operating the system capable of meeting customer inventory and operating expense demand: in practice, this means improving and operating expense the planning and scheduling systems so expense that we create a flow of value. We can also quantify the financial consequences of the current state: what is the effect of are inadvertently out of alignment with customer value and supports the poor service, lost sales, extra inventory definition of appropriate measures to monitor the effectiveness of the and resources? That makes it very clear to new system. the management team what the financial benefits can be from the improvements The corrective actions needed to improve performance are often that are designed. accepted as necessary despite the fact that they are underpinned by a philosophy very different to that which informs conventional Once we know how we want value to accounting practice. In fact, it is often not until later on, when you flow, we need to know how to keep the want the system to drive further improvement, that the outputs of the flow going: what could stop the flow and standard accounting methods can prove to be an impediment to further how can we make sure the flow can be application of lean principles: measures which are believed to inform maintained? This is what we look at in you about how to “take cost out” will obstruct thinking about how to “Maintain Flow”. It’s where we diagnose “add value in”. See John Darlington’s article in this issue on page 20 to the causes of losses of availability and understand more about why this is. quality – and consequently where we can identify the need for tools which Working through the Thinkflow framework will guide you through can reduce or eliminate those losses assessing your current ability to create flow, leading to the design of an and thereby make the system more improved system for delivering value to the customer. The selection of efficient. Because “Create Flow” has the appropriate tools to maintain and improve the system will emerge defined what’s constraining the flow of from this design. The tools themselves are not complex: you know them value, our decision-making regarding already or can readily learn what is needed when you need it. The critical the deployment of these tools is point is that the need for the use of the tools will be self-evident when automatically prioritised. the requirements of the system to create a flow of value are clear.
Designing the perfect flow system The Thinkflow approach has been tested and refined over many years and making it work efficiently through in a wide range of different businesses, and many organisations have focussed loss reduction activities is fine experienced a step-change in the speed and effectiveness in achieving in theory but we know that in everyday results from their lean activities by designing implementation programmes operations, variation will occur and around the framework. There’s enough in this article to give you direction problems will happen. We need to ensure on getting started on this approach for yourself: GANBATTE!
www.leanmj.com | May 2012 15 principles & purpose
The central nervous system of lean
he world of business is changing fast, and the only certainty is that T the pace of change will Matt van Wyck, a graduate at accelerate. It is in this world that flexible, the MSc in Lean Operations integrated, simple and waste free organisations will thrive, and the at Cardiff University and adoption of business improvement a former metallurgical initiatives has become the rule rather than the exception. engineer, designed and deployed a lean Although many organisations have adopted various forms and shapes transformation programme of business improvement and across the South African transformation methodologies, the success rate of such interventions is operations of DeBeers. In this less than convincing, and failures are article, he gives a personal more abundant than success stories. The reasons for these failures are well reflection on what he learned documented, and we all agree that while on the field. success requires very focussed and specific thinking and acting from the executive layer through to the people operating the process which generates value.
My career started as an engineer in operations, and in trying to continuously As an engineer working in an environment which improve and understand how the celebrates heroic feats, the hunt for value is focussed operational engine works I stumbled on significant financial improvements upon lean. Studying lean has been a sobering experience, depicted by many layers of learning, and like peeling an onion each layer holds new wisdom.
16 principles & purpose
The layers of my these beliefs create organisational designs which stifle agility and must be guarded against as it is the leveraging of inputs which underpins learning evolved improvement. as follows: The realisation that small Understanding that none of these layers will lead to a successful improvements hold significant value transformation if not understood and aligned as part of a system (kaizen). As an engineer working in an that allows every individual, every day, to improve on what they did environment which celebrates heroic yesterday, to improve the product for the customer. feats, the hunt for value is focussed on significant financial improvements. To buy into lean management needs to see what good looks like. Do create and leverage networks, visit good sites and interact with people Understanding that solving problems who have done this before. requires a simple yet scientific methodology (PDCA). This cannot be This is required to change the system, to enable a new way of done around a boardroom table or work and force compliance towards a better organisation. It is like from an office, and time spent at the reprogramming the organisation’s default button to prevent the shop floor is imperative. people from returning to bad habits.
Understanding that people at the The layered nature of lean unfortunately creates complexity. To return lowest level of the organisation to the onion metaphor, managers often buy what the outer layer hold the key to creating value. Every offers, and many consultancies exploit single layers of the whole. The moment of the day, they enable real transformation is, however, concentrated in the centre of the operating systems which generate system, which is hidden from view until the journey is experienced and value, and understand the inputs understood. required to make these work better than anybody else. Both hands and It is the quest of understanding what lies at the heart of lean that guided brains must be respected. me towards studying the role that management and measurement systems play in the sustainability of lean. My hypothesis was that these Satisfying the needs of the customer, systems form the central nervous system of a lean transformation. If whether external or internal, created aligned, these systems will enable transformation by creating the right the focus required for improvement. context, focus, integration and interactivity (adapted from the work of The more visible and simpler these Dr. Dean Spitzer) to create superior organisational management and needs are made at the front line, performance. If wrong, the deployment of lean will almost always fail in the easier it is to improve value and the medium to long term. enable flow. My view is that the core of lean transformation is to be found within The awareness that physically doing the management and measurement systems which connect the brain things differently changes behaviour. (strategic aspect of the business) to the hands (front line execution) John Shook’s saying that “it is easier to of the business at which point value is being added. This creates the act yourself into a new way of thinking context for fast, decisive action, breaks down functional silos, and leads than to think yourself into a new way to the achievement of higher levels of competitiveness. of acting” holds significant value. Although improving the financial performance of an organisation is Doing things differently requires imperative, this has to be balanced by a respect for the individual (the a deep understanding of how the whole-person philosophy). Within such an environment, measurement processes work. This is achieved by functions not only act as a performance yardstick but become a social physically mapping the value stream, phenomenon. standardising the best way of doing it now, and looking for opportunities of Measurement systems play a fundamental role in sustaining and doing it better. As Deming said: “It is embedding a lean deployment as it focuses the efforts on the right not enough to do your best; you must things. Martin Preece, a general manager at one of the operations know what to do, and then do your studied, said: “Measurement is the catalyst which replaces the University best.” of Lean by the Factory of Lean”. When the new measurement system was deployed at this operation, it resulted in an almost instantaneous Doing the right things requires the improvement of the critical processes which yielded significant value. understanding and leveraging of inputs rather than outputs. Many western However, effective measurement requires a supportive organisation management philosophies teach to use where everything is aligned and synchronised towards achieving outputs to transform organisations, but a common goal. The right measures must be supported by both
www.leanmj.com | May 2012 17 The central nervous system of lean Matt van Wyck
integration (between departments to enable flow) and interactivity (socialisation process). These requirements will, however, not be met My view is by either a partial or a tools approach that the core of lean to lean. transformation is to This interaction of the organisational be found within the design with standardised work and management and the right measures is critical, and must measurement systems be coordinated through a common which connect the management system. This complete brain (strategic aspect synergy ensures that the measurement system translates the strategy into the of the business) to right focus at the front line and that this the hands (front line work is performed in the best known way. execution) of the Any break in this integration will lead business at which to instability and unpredictability of the value stream. point value is being added My research studied the effect of the measurement system on a lean deployment in a leading mining and Measurement is not used to guide improvement efforts; luxury goods company. The case study emphasised that any disconnects Little cross-functional learning occurs between departments; between the fundamental requirements of a measurement system will impact That causal relationships between measures are not understood (poor directly on a lean deployment, and understanding of the value stream); indicated that there is a direct correlation between the maturity of a lean Lack of a management effort to tap into the brains of front- deployment and the maturity of the line employees; measurement system. At the front-line level of the organisation, these translated into the Within operations that were struggling following major shortcomings: to implement lean, the following issues were fundamental to the problem: Low levels of alignment to the company goals;
A lack of management interaction with Little awareness of what is expected from them on a daily basis; the measurement system; Inaccurate understanding of customer expectations; The position of strategic output measures at the front line which they Low utilisation of employee capability and skills; could not control or impact on; Low levels of commitment to come up with improvement ideas. Inflexibility of measures to adapt to changing circumstances; The research concluded that a supportive management style is required both to energise the lean journey and to tap into the immense power of Lack of trust in the measurement system as it is often used against a well-designed measurement system in support of such a journey. Such employees; a management style is clearly described in the literature on lean, and positioned in the work of both David Mann and Steven Spear. The data gathered in measurement is not turned into knowledge; A transformational measurement system must be characterised by balanced measures aimed at guiding and focusing lean efforts. In its Measurement frequency and absence, the efforts will result in a disillusionment which will probably interactivity too low to be pro-active when issues arise. Management is thus result in the abandonment of a lean deployment. The findings of this blind to shop floor issues and cannot research pointed to a number of key capabilities which are required to respond to deploy countermeasures; guide deployment efforts:
18 The central nervous system of lean Matt van Wyck principles & purpose
A well designed measurement system is a key supporting element in any lean implementation;
The design of such a measurement system should cater for the systemic requirements which underpin successful lean deployments;
The measurement system will function optimally only if there is a thorough understanding and integration of the four key requirements (context, focus, interactivity and integration);
A Such a measurement system must be aligned to the strategy (and, hence, transformational customer needs) and aim at managing the entire process (flow) in measurement order to create value; system must be characterised by Although standardisation of the system is necessary, space must be created to accommodate the evolutionary nature of measurement, balanced measures as measures will change as the value stream is improved, and the causal aimed at guiding relationships between measures crystallise; and focusing lean efforts. In Measurement must be supported by all the management levels within the organisation. Care should be taken to avoid the de-linking effect of functional its absence, the autonomy; efforts will result in a disillusionment Every individual must be aware of their specific roles in supporting and executing which will measurement. Any gaps in performance should become the main focus of probably result in improvement efforts; the abandonment A significant effort is required to ensure that measurements are balanced of a lean between quality, cost, delivery, safety and morale; deployment Although significant gains are made possible by deploying a well-designed measurement system, organisations must be aware of the potentially devastating power of measurement if the measurements are misaligned to the rest of customer requirements. Accordingly, organisations must allocate the required resources and management time to aligning measurement.
By aligning effort through the deployment of a scientifically designed performance measurement system, the complexity of a lean implementation is significantly reduced and a platform will be created from which everybody will be able to contribute to improvement.
An effective and aligned measurement and management system is an integral part of a successful and sustained lean implementation. This system should cater not only for measurement of the key processes in the organisation, but be enabled by engaged leadership and guided by standardised work.
Should all these aspects be present and acted upon on a daily basis, the chance of embedding a successful lean deployment is highly increased.
www.leanmj.com | May 2012 19 principles & purpose
Take company uniqueness into account
Forcing somebody else’s model onto a company hoping it will work is a dangerous game. John Darlington warns against the risk of adopting prescriptive approaches to lean accounting, which could mislead many practitioners who do not have the advantage of demand stability and volume enjoyed by automotive companies.
lthough book keeping and accounting record keeping goes back many hundreds of years, management accounting is a A relatively new subject and really began to “take off” during the era of the Industrial Revolution.
Until then “piece rates” were a popular method of paying people and as labour and material dominated the costs of running an organisation, overhead departments were small, you could argue that a product cost did truly represent the real cost of producing an item. For example, there was real market traceability between the sell price and the money the business had parted with to make the product.
As a consequence of the Industrial Revolution, owners, attracted by the gains to be had from economies of scale, were inclined to invest
20 principles & purpose
significant sums of money to inventory if rival systems? It isn’t in capital and hired for periodic profit as though there were no workers longer term to reporting - a financial other warnings. develop skills rather than reporting response. hire them “spot” and pay Taaichi Ohno: “It was not by the piece produced. The result was “an enough to chase out the invention” hinging around cost accountants from the Add to these changes double entry book plants. The problem was the propensity of keeping that inflated to chase cost accounting organisations to integrate inventory value in terms from my people’s minds.” vertically and market of work in progress traceability began to and finished goods for And Deming: “…using diminish between periodic profit reporting cost accounting metrics the costs of running that is with us to this to make decisions is like production and the day. And inadvertently driving by looking in the revenue streams from it favours profit during rear view mirror... We product sales. This was periods where production need good results, but the “fuel” needed to outstrips sales. And worse Most of management by results is explore management it penalises profit if you the innovation not the way to get them.” accounts for internal happen to stop replacing in design decision making as unwanted inventories. How come the academics opposed to financial of standard did not spot that these accounts for external Ever heard the phrase, costing systems were increasingly reporting. “We have not recovered had been redundant? The only enough overhead.” Well, developed discussion I recall when The result of these now you know what it trying to qualify through forces, to provide useful means: “We haven’t by 1925 and the Chartered Institute information for managers produced enough things”. increasingly of Cost and Works to make better decisions the Accountants was a facile against a backdrop of Never mind that we have administration debate on fully absorbed distance from markets, satisfied demand and or marginal costing; really was ultimately the reduced our lead times. was a discussion about which design of the standard The double entry book computerised costs were variable and costing system. keeping is unhappy! and integrated which costs were fixed. from the late The mechanics of the So, most of the Answer: neither or both, system had one last innovation in design of 1960s with the it depends on the time twist worthy of note standard costing had rise of MRP frame being considered. to it. The growth of been developed by culminating companies around the 1925 and increasingly in today’s ERP But this was not the way 1920s and the pressure the administration exam questions were on capital markets was was computerised and systems structured. What we got the motivation for public integrated from the were exam questions accountants to agree late 1960s with the rise that posed seductive if standard well-defined of MRP culminating in entirely simplistic and procedures that any today’s ERP systems. useless models compared audit firm could, well, with what real companies audit fairly. What we have is a were actually grappling case of uncorrected with in real life. The public accountants obsolescence, not could not cope with the original error. The questions posed diversity of methods always had just a handful they encountered when Zombie of products, a single contemplating the costing Zone set of resources; an practices of the engineers How come 50 years plus assumption that there in their attempts to trace went by in cost accounting was no starting inventory costs to products so this stagnation until Johnson or ending inventory was given up to a broader and Kaplan and Goldratt for fear it distorted the method of allocating cost came up with alternative variance analysis so
www.leanmj.com | May 2012 21 Take company uniqueness into account John Darlington
favoured by the Institute yet invented circa 1925! VAT Analysis. Plants classified by BOM/Route Shape
So flow and lean accounting are united in the need to change:
Conventional accounting systems Materials flow Materials encourage overproduction by their clumsy interpretation of the V A T “value added” principle;
They do not recognise the pools and cost drivers to deal with overhead allocation in a discernibly importance of bottlenecks, different form than standard costing. A more accurate product cost was constraints or pacemaker the promise. processes; TA, which evolved from Theory of Constraints, suggested that very They encourage local efficiency few costs were truly variable with one more or one less unit sold creating “islands of excellence”; but a thorough understanding of constraints i.e. limiting factors was required. Product costs were ignored in favour of contribution They have little or nothing to say often linked to the consumption of constraint resources. Goldratt’s about lead times; throughput inventory and operating expense (TI&OE) was direct, simple and very demanding and we use it to this day. They promote the idea that the bigger the batch the lower the Both rival schools of thought had their “champions” and claimed unit cost; their successes.
They encourage “cost reductions” And despite the fact that I personally favoured TA I think it could which often prove to be “mirages”. be said that “ABC won”, at least in the UK. It certainly entered the mainstream vocabulary and more companies claimed to be applying ABC than TA.
The list is not meant to be exhaustive. I should know, I was quite often invited to ABC conferences as the it is frightening to consider the amount “token heckler”! of real money being spent by people continuing to design and administer To summarise, I think you can see these antecedents in the new rivalry these old out-of-touch systems. emerging as the question of what sort of accounting you need for a lean organisations is asked. Installing or upgrading a modern ERP system is eye-wateringly expensive and Flow accountings roots are definitely traceable to the TA approach. yet in the course of doing it you embed Knowing some of the main players in lean accounting I would argue standard costing invented circa 1925! that ABC is still influencing their approach. Change Now If marginal costing and fully absorbed We have a pretty unique opportunity to establish afresh the accounting costing vied to answer the question of data we need to make better decisions in a lean organisation. which system best served management decisions up to the 1980s, two new I have a number of concerns about the current direction of lean rivals appeared with Johnson & Kaplan accounting: the movement places a great deal of emphasis on the and Goldratts writing. We got activity value stream. And you can appreciate why this is given so much pre- based costing (ABC) and throughput eminence: it is mentioned in the 5 lean principles established by Dan accounting (TA). Jones and Jim Womack in their seminal book Lean Thinking.
And in many respects these were a It is certainly possible to reduce the need for scheduling polarised version of the earlier rivalry. synchronisation when resources are co-located and I am not naïve enough to say the benefits are limited to this alone. However shared ABC put product cost calculations as a resources do exist. In fact shared resources appear to be more central platform but recommended cost common than dedicated value stream based ones.
22 Take company uniqueness into account John Darlington principles & purpose
And as if to emphasise their dislike of shared resources lean accounting often labels them “monuments” and not in a flattering sense.
Well, this is ignoring some fundamental production organisation structures. I learnt about VAT analysis not in the accounts class but via constraint based management. There are three fundamental structures which tend to reflect the dominant characteristics of the production bill of material and route.
“V” plants will typically be process orientated with little or no assembly. Steel or paper mills, pharmaceuticals at least at the primary end etc., would come under this category. They start off with common processes but points of differentiation allows the product offering to explode into many end items.
“A” plants will have deep bills of material with many layers. Component and sub-assemblies eventually end with few unique production items. Aerospace bodies, wings, engines and the final aircraft itself provide good examples.
“T” plants are the modern day assembly operation. The “bar” represents the common components either bought out or made in house which can be put together in an almost infinitely large range of end items. I worked in The point is that AlliedSignal Turbochargers for many years and we were predominantly “T” orientated. the lean accounting And the point is that as you move from left to right on the diagram above movement is in danger you can plot the likelihood of being able to dedicate into value streams. It of taking a concept like can often be achieved in a light assembly plant but a steel mill, a large forging or casting business, no, not desirable let alone feasible. value streaming and forcing it into situations Even in “A” plants where the final assembly is almost certainly arranged by stream, for example by type of aircraft, the further you go upstream in the bill where it does not fit as of material the more you find manufacturing centres that feed all the different types of jet assembled with sub-assemblies or components, like panels. You it might in a lightweight are not going to lay down extra autoclaves or chemical milling equipment just assembly environment because you make five different types of aircraft; one for each?
where dedication makes And if we start to discuss service-based organisations like hospitals then the sense and is relatively shared resources become even more critical and often dominant. There is a possibility of excluding a whole plethora of organisations that also need cheap to accomplish accounting assistance with this dogmatic approach.
Maybe we should apply value streaming to the M6 motorway using type of vehicle? One M6 for cars, another M6 for trucks and a third for buses!
The point is that the lean accounting movement is in danger of taking a concept like value streaming and forcing it into situations where it does not fit as it might in a lightweight assembly environment where dedication makes sense and is relatively cheap to accomplish.
We certainly need to understand how to treat shared resources better but the solution is not always to double up to the point of dedication.
Flow accounting believes that we need to reflect the current physical flow to the boundary walls of the organisation which is the only place where real money changes hands. This will reveal V, A or T. Record the potential delays and mismatches and this can often be traced back to shared resources. Dedication is but one option on how to improve the flow.
The lean accounting concept of a maturity path arises because you undoubtedly find that not all resources can be packaged into dedicated
www.leanmj.com | May 2012 23 Take company uniqueness into account John Darlington
value streams. So allocation becomes accounting. Flow accounting is clear, when utilisation of constraint the countermeasure “in the interim”. resources start to reach 80% to 85% you are approaching bottleneck You are likely to wait a long time if you territory. And if you continue to take on additional orders your delivery accept the flow accounting VAT analysis. promise dates will start to deteriorate and lead times will begin to Of course allocation does not lessen the grow in an unpredictable manner. total expense, but it is comforting home territory to some accountants. Flow accounting is completely linked to time-based capacity planning with the above levels of utilisation at the forefront. Unfortunately, lean Lean accounting wants to get rid of accounting is reticent on the same subject and as part of the value “wasteful transactions”. Who wouldn’t? stream organisation advocates dividing the cost of the value stream Inventory recording, valuation and other by the number of items it has produced or sold. The result of this is a associated transactions like work orders different unit cost but still one that encourages you to take on more are often in their sights. The fundamental business with scant regards for time based capacity planning. idea is that once the inventory is beneath a certain level, for example one month’s worth, there is no need to record it separately as raw material, work in Organisations cannot exist in isolation from the market; progress or finished goods. You can any organisation regardless of size or orientation needs to simply expense it. meet the requirements of its customers Now I like the Gregorian calendar as much as the next person, but is this really sensible? Unit cost thinking was a major contributory factor in getting us into Firstly, raw materials, work in progress this mess in the first place, and I can see little or nothing coming and finished goods do three totally out of lean accounting which is flagging the issue of linking time and different jobs for manufacturing money closer together. organisations and we need to understand how much we have of each in terms of And this is really unforgiveable because clearly the sell price is at time. Suggesting we can do away with the least a tactical if not strategic decision and should not be left to unit transactions that allow us to understand cost thinking. the different elements does not make common sense. So why have a unit cost? We do not need one if we are limiting ourselves to management accounting. Only the desire to retain consistency Flow accounting wants to know all about with Generally Accepted Accounting Practices (GAAP) and financial inventory in its different forms: accounting is holding us back.
Because the work in progress and Flow accounting wants good financial accounting to stay in the accounts finished goods reveal how well the department. We find GAAP generally unacceptable (GAAPGU). company is really using its capacity. Management accounting practices offer wider opportunities to explore Only capacity puts WIP and finished how to assist lean practitioners make more effective interventions. goods in place. Summary Because, as Ohno said, overproduction There is a historical precedent for dividing financial accounting from is the worst form of waste and “earlies management accounting. and lates” in stock reveal it. In the same way that standard costing was applied long after the So in an effort to remove “wasteful “model” had outlived its usefulness there is a danger of lean accounting transactions” we might lose these “straight-jacketing” us into the wrong direction. fantastic insights. Reducing the waste in an accounts department, whilst The reservations expressed here are symptomatic of the lean movement commendable, is not valid if the business as a whole. Trying to force tools and “models” which worked well in one as a whole suffers. environment onto others indiscriminately will ultimately fail and damage the reputation of lean as well as the organisation on the receiving end There are some painfully naïve of it. statement being made regarding capacity and the ability of the We need a less prescriptive approach whilst retaining our desire to organisation to take on more business create and maintain and organise so that the flow of goods and services and to be fair this is not exclusive to lean gets better to end customers.
24 Take company uniqueness into account John Darlington principles & purpose principles & purpose Integration: the way forward for supply chain
Shane Maher MBA shares with LMJ readers a research investigating the current thinking on supply chain integration by offering a case study of a leading orthopaedic manufacturer.
ike John Darlington suggests, if we can industry by using an shorten the length of time a product actual integration L remains within the supply chain and ensure process at a medical that the correct product is given to the customers at device manufacturer Organisations the end, then we shorten the time between delivery and by performing a cannot exist in and payment. critical review of their implementation process. isolation from It is also recognised that the proper management of the market; any any SC will diminish risk and uncertainty and will also Organisations cannot organisation optimise the inventory level and process cycle time so exist in isolation from the regardless of size that the organisations are able to satisfy the customer market; any organisation and make a profit. Recently, there has also been a move regardless of size or or orientation from a supply driven to a demand driven marketplace. As orientation needs to needs to meet the a result, previous differentiators such as manufacturing meet the requirements requirements of its quality and local supply no longer apply. of its customers. Supply customers of goods and services Aim and objectives is the only point where The basis for this article is to evaluate the current the customer is willing to thinking on supply chain integration (SCI) and the part with payment for the implications and learnings for the medical device product or service. The
www.leanmj.com | May 2012 25 Integration: the way forward for supply chain Shane Maher
supply chain is the means by which the Development organisation gets the product or service of integrated to the customer. relationships In 2009, Bicheno and Holweg said: “The As with any process, SCI is part process and part key trick to supply chain management relationship, for integration to succeed there has to is to consider the entire suppliers, be recognition of the fact that the interaction of the manufacturing plants, and distribution different parties within that relationship is crucial to tiers, and the aim for synergy: 2+2=5”. the outcome of that relationship. As we have seen already, the traditional methodology can be adversarial Manufacturing, long seen as the basis or dependency based. For supply chain to become of production within the medical device integrated there has to be a move away from that sector, has evolved into a worldwide, adversarial- or dependency-based methodology. commodity management, low-cost base process. Due to the downsizing of the Trust is an integral part of building that new relationship, world itself it is now very easy to source the importance of trust cannot be underestimated in any product anywhere, and quality, which for In early relationship. During the integration process a number of a long period was seen as a differentiator, 2010, the different points or stages must be clearly outlined. no longer applies. integration Mapping of supply chain process First steps In early 2010, the integration process began with a Any organisation that wants to commence began with big picture mapping exercise. This involved a number its journey to SC integration must first a big picture of different functions internally including planning, understand its own supply chain. Very few mapping procurement, warehousing, logistics, incoming organisations have mapped the complete exercise. inspection, finance and quality. The initial mapping supply chain and as a result have limited exercise was also targeted at the internal and external understanding of the complications within This involved structures. They mapped the entire SC from tier 1 to the it. This lack of understanding frequently a number products leaving the manufacturing facility and arriving in leads to losses within the system. As with of different the primary distribution centre. any process review or change, the primary functions focus needs to be defining the current The results showed that the facility had 562 active state. Without this mapping, organisations internally suppliers across all categories. The team conducted could be limited in the actual change including a number of exercises as part of the mapping event taken, or focus resources in areas of planning, and as support for the mapping event. The inputs to minimal return. procurement, the mapping event and method of data gathering are outlined below. Once the mapping exercise has been warehousing, completed, there will emerge a focal logistics, We can reduce the complexity by segregating the point around which the SC rotates. For incoming supplier base of 562 into three distinct categories: the majority of organisations this focal inspection, point is the relationship between the manufacturing organisation and its finance and suppliers. This relationship is usually quality Raw materials, including all packaging items as managed by the purchasing/procurement per the BOM; departments within any organisation. Consumable items, all controlled items used in This understanding is essential to ensure the manufacturing process but not on the BOM; that de-coupling points for the chain are established. De-coupling points define the Services, this category included any outsourced point at which the SC is driven by forecast influences on the SC from freight and logistics value streams, the point at which the SC providers to custom brokerage services and is driven by actual customer demand. internal warehousing activities. These points in the SC are inventory locations that buffer against variation on the demand side on one side and variation in supply on the other. Failure The mapping exercise was led by the purchasing group to hold inventory in the correct location and to aid the exercise a set of controlled questions or quantity could result in stock outs or was identified to ensure that the information excess inventory. gathered was consistent across the SC. Part of the
26 Integration: the way forward for supply chain Shane Maher principles & purpose
answers required were provided by meeting with suppliers on new product the procurement individual and the introduction (NPI). These activities remainder was provided by the supplier. represent only 17% of the total time in The information was then collated into procurement activities. a supplier matrix detailing answers to the questions by supplier. These Conclusions questions included: from the mapping process Prior to the mapping event there was a Savings both generated and lack of understanding within both the projected. This was to include SC group and the management team of price changes but separately the interaction between the different “Continuous Improvement elements within the supply chain. There Projects” (CIPs); were a number of tangible benefits to conducting the exercise and the team Risk Assessment rating based on working together with the other value current financial standing of the streams on gathering the information: supplier from low, medium or high; It created a visible SC that Product supplied including the previous to the exercise remained number of different SKUs and the hidden. The team had a greater batch size used; understanding of their actions on The results the total SC; Lead time including the lead time showed that the It made the task of articulating at supplier, their tier one supplier, facility had 562 active all external processing times if the need for change easier for applicable and freight services; suppliers across all both the current SC group and the categories. The team management teams at a higher Current communication tools conducted a number level; used including frequency of of exercises as part It showed the lack of interaction supplier audits and business of the mapping event reviews conducted by our between the supplier group organisation. and as support for the and the procurement group, mapping event very little of the communication could be described as positively contributing to the SC; The results of the review when totaled show that the lead time of The transactional nature of the the total supply chain is 74 days, the procurement groups activities and manufacturing facility only accounting for the lack of interaction with the 6% of it. suppliers;
The final part of the mapping activity There is a high value on the total was the assessment of the purchasing amount of inventory within the activity and the extent, if any, of entire SC but the team have no relationship management. Each of visibility to the total inventory in the procurement professionals were the system. required to keep a log of activities over a two-week period. This task was completed by utilising the outlook calendar system and categorising Creating the the different tasks completed on a future state daily basis. The process required one area of focus due to the fact that a single focus would The only positive forward looking activity reduce the risk of disjointing the process performed by the procurement group and prevent a lack of understanding of in conjunction with the suppliers is time what was to be achieved.
www.leanmj.com | May 2012 27 Integration: the way forward for supply chain Shane Maher
The focus area identified was reducing the lead time of the entire SC from the current 74 days in 2010 to 20 days total in 2014.
The reasoning behind the focus on lead time was to increase the responsiveness of the total SC to respond to the customer and as an enabler of moving the entire system from one of a push system to a pull system. The main focus of delivering the future state were identified as:
Creating a visible supply chain that could react to changes in demand;
Create trust within the supplier base;
Educate the SC group including the supplier base on how to improve;
Reducing the amount of manual input required to change the flow of material;
Eliminating the requirement for storage of material on site thus releasing the current floor space of 17,000 sq ft back to production;
Standardising the work required to ensure consistency;
Creation of systems to support the drive to 20 days by 2014.
Supply Chain integration framework
Information view
Tier 1 Tier 2 Manufacturer Customers End user supplier supplier
Quality
Product flow
Logistics
Integrated process (VMI)
Common metrics & measures (Lead time)
Relationship based on trust
Agreed strategy deployment
Training & knowledge transfer
Mapping & understanding
28 Integration: the way forward for supply chain Shane Maher principles & purpose
Missing links Once this levelling has been achieved the During the implementation process organisations need to ensure directional a number of factors appeared to be continuity by agreeing the strategy crucial to the success of the project, deployment process. these components are covered in the current literature available as reasons These are the building blocks of for failure. The argument raised in this a relationship based on trust and article is that the separate components understanding. This process is further must be addressed with a single end in enforced by having a common set of mind or the process will descend into metrics and measures; this process one of maximising individual links to the reduces the risk of slippage in determent of the chain. understanding. The final building block is the usage of integrated process such The importance of understanding the as vendor management inventory flow of material through the chain (VMI). The VMI programme enables and the interactions of the various risk equalisation latterly along the components impacting flow cannot supply line. be assessed in isolation. Based on the learnings gained from the process, I From a From a transactional lean perspective, have created a model to incorporate the introduction of the VMI programme the buildings blocks of integration. The transactional lean has made a considerable difference to the model differs from others currently perspective, the amount of time spent by procurement available as its foundation is based individuals on tactical procurement firstly on gaining understanding introduction of the activities. In the initial mapping exercise through mapping, building the VMI programme it was identified that 55% of the time relationship through learning and available to professionals was spent knowledge transfer and agreeing a has made a monitoring inventory and placing or strategy deployment policy to deliver altering PO’s. On any supplier using the a relationship based on trust, with considerable VMI programme this has reduced to common metrics and measures of difference to 5%. This created a capacity within the integrated process. procurement group. the amount of The concentration is required to be on time spent by I suggest that there is a number of the flow of product through the entire SC contributing factors to the low utilisation with quality and logistics pivotal. procurement of integration as a business model. SCI is an all encompassing process that Ensuring the quality of the product as it individuals requires a lot of effort and management progresses through the chain is one of the on tactical over a long period of time. central properties. Failure to have quality improvement at the core will result in an procurement The integration process that was increase in the amplification within the SC activities undertaken as part of this case study is caused by failure demand. nearly two years in progress and during that time there have been a number The second core activity is a logistics of successes. The biggest success to service that is fully integrated into the date has been the relationships and SC. The provider must be part of the understandings created with the supply strategy and training programme. The base that was previously based on a information exchange needs to be a two more adversarial relationship. There way process up and down the chain. is a lot more work required to get the The process needs to be repeated to organisation and SC to full integration ensure continuous improvement of the but in the opinion of the researcher integration process. the building blocks are in place. Prior to commencing a similar journey any The enablers or steps necessary for organisation willing to commence integration start with mapping and the process will need to have an understanding leading to greater understanding of the commitment knowledge within the SC. At this point, involved. The results can be delivered but a level of training is required to ensure there are no shortcuts to achieving any common language and understanding. level of integration.
www.leanmj.com | May 2012 29 IT’S A LEAN WORLD Netherlands
In partnership with:
Unstoppable René Aernoudts is the founder and primary education as well, with great there are positive, director of the Lean benefits to be reaped by children, strong examples. Management Instituut teachers and school managers. At the Lean Management Instituut we support More and more share and executive lean practitioners but also CEOs and their knowledge, networks committee member of leaders in designing and running their have been evolving and own lean journeys, learning from peers even ministers are aware the Lean Global Network with Dan in other organisations. Many consultancy of the power of lean and Jones, John Shook and José Ferro. agencies offer lean services, and more are not only supporting and more universities and business it, but demanding that In this article he introduces LMJ’s schools now offer their students their agencies use it to special on lean in the Netherlands. educational programmes on lean. provide their customers Considering all this, the future of lean in with a better service and the Netherlands looks promising. experience. An interesting ean in the Netherlands has rapidly been example was a visit of 140 popularised in the last decade. It started off in At the recently organised yearly Lean hospital employees and L traditional industries, but has now spread in Management Summit (this year at its managers to one of the very different areas, from banking and insurance 8th edition) we received lots of positive factories of AkzoNobel, companies to hospitals and government agencies. Not feedback, and we’ve heard many a paint manufacturer, only mass manufacturers, large service providers and inspiring stories and case studies. With where they saw that administration agencies, but also the engineered to guest keynotes Dan Jones, Michael Ballé you can learn a lot from order (like turbo generators) and luxury goods and Sammy Obara, and many practical another industry, even industries (like luxury yachts) have been introduced to examples of applications, the event though they didn’t think lean. More and more companies have started a lean showed that lean has been embraced by this was possible when journey, not only door-to-door but also in full supply many organisations. the day visit started. chains, with multiple organisations working on full value streams (like in construction). When we look at the level of lean there Lean is here to stay, is still a long way to go though. Like although our mission Good initiatives are running in hospitals like the Erasmus many other countries have learned, at the Instituut is not Medical Centre and government agencies like the many start off choosing a tool approach, over yet. In fact it just Land Registration Office (Kadaster) and Rijkswaterstaat which often does not translate into started: there are lots of (Infrastructure). Now lean has shown it’s applicable to sustainable results. At the same time, opportunities out there.
30 it’s a lean world Genchi gembutsu, with children
achieved with children in elementary schools: they are very enthusiastic, and they love to celebrate results and sort issues.
Under the programme, which involves about 100 schools at the moment, students are taught kaizen and PDCA, and they are encouraged to set targets for the classroom and actively work to achieve results (in reading, maths and languages, but also in the way they work together). Individual results are linked to class results, which in turn can be linked to school districts results - which offers school managers an opportunity to benchmark themselves against best practice and learn.
Children are empowered: among other things, they lead parents-teachers meetings. It’s a bottom up approach that uses children’s enthusiasm and drive to help leadership establish a mission and a vision from the top down, and translate them into day-to-day actions. No-one escapes CI: the systematic alignment of all levels is key.
Visual boards are used to set targets, and weekly assessments look at progress. There are individual and collective goals, but also social standards and ground Klasse.pro promotes the adoption of rules on behaviour that must be respected: children want to know the scores, and some of them don’t continuous improvement in elementary perform well, but because targets are also linked to schools, with the goal to enhance the behavioural rules nobody is picked on and individual errors are corrected by the group as a whole. quality of education. Dewi Lou and Marijke Broer-Bos explain why lean is not Students know who does well and who doesn’t, and they talk about it. Everything is clear, and this makes for a nice just for higher education. learning environment. Now, if they don’t see the boards in the next class they go to, they ask for them. We recently spoke with a little girl whose results weren’t as good as chools constantly have to deal with the quality of the education those of the rest of the class. She told us: “If my results they provide, but this isn’t the only reason why promoting a improve a bit, the results of the class will improve too.” S culture of continuous improvement in elementary schools is so valuable. The world is changing rapidly, and today’s children will be likely The real challenge is developing the skills of teachers to have 10 to 15 jobs in their lives: a new set of skills and principles must and school leaders, to have them teach less and learn be developed, one that includes critical thinking, cooperation, social more. To many of them, it is a shock, as all they have responsibility, problem solving and creativity. It’s life-long learning, of been doing througout their careers is teaching - letting which education is the main enabler. them visiting businesses and creating a professional learning community among different classes and We see an opportunity to help Holland remain an important and schools, for example, could help making the case for a competitive country, while making a long term investment into Dutch more heartfelt adoption of continuous improvement society. It is somehow surreal to see the great results that can be principles, whose ultimate goal is a better society.
www.leanmj.com | May 2012 31 IT’S A LEAN WORLD Netherlands
The one to watch
manufacturing to HR, had received the same basic lean education. Philip Uythoven, manager of process development, In 2010, the central PMI operations centre in cooperation with the affiliates selected “13 common supply chain, at Philip main challenges” (split into Processes and People) to Morris Holland BV, talks help identify improvement opportunities in every area of the business. Diagnostic Week was used to look for about how the company these “symptoms” and analyse processes, through value managed to move from stream mapping and A3s. PMH volunteered to have the pilot of the Diagnostic Week approach and this became the mere use of lean tools the tipping point. PMH identified four focus areas and to creating a culture of started looking at the whole value stream. continuous improvement. It soon became clear a new leadership model was needed before a continuous improvement model could be created: managers and supervisors went ith an output of 80 billion cigarettes produced through a one week training programme, before in a year, Philip Morris Holland is faced with entering the employee engagement programme W unique challenges. Customers often demand where every team spends a day to discover the new new packaging and filters, for example, and the continuous improvement mindset. This year, building company soon realised it needed to be faster at on the ability of workforce and leadership to work changing its product portfolio. The affiliate needed to together, PMH will embark on their first experiments change from big to better and from large to lean. This is with flow and kanbans/supermarkets. While the main supported by the strategy to become the fastest focus is now on manufacturing, anybody from any improving factory within Philip Morris International. business area can still “pull” expertise to implement lean projects. Philip Morris Holland’s lean journey started in 2009, when the global company launched the OPEN The mindset changed dramatically, with focused programme, Operations Performance and Engagement improvement and set priorities now on Philip Morris model, based upon two pillars: Processes and People Holland’s agenda. Employees were used to big projects, & Organisation. In the Processes pillar basic lean tools now they are after small improvements instead. With were introduced, including 5S, 7 wastes recognition and people more empowered and engaged in kaizen, standardised work. Each affiliate adopted the OPEN managers can concentrate on facilitating, going to the programme with its own approach to change - to account gemba, checking on standards and coaching the people. for differences in local culture. Where people and culture come together with lean In Bergen op Zoom a group of managers and engineers manufacturing processes, results will follow in becoming was trained using the train the trainer concept, and the fastest improving factory, delivering top-quality soon all 1,400 employees across the business, from products according to customer demand.
32 it’s a lean world Insuring
change
Sybrand Hoekstra, master black belt lean and six sigma, is responsible for lean development This is transforming our management model, from top down to bottom up. Our and training at insurance company leaders are beginning to believe in people REAAL. Here he talks about how and spreadsheets at the same time. We have flipped the pyramid, putting people six sigma couldn’t change the on top, and support is now building up firm’s way of working, and how quickly. Once you get 20% of the people on board, it becomes unstoppable. With lean made the difference. We six new people joining the team this year, it is now clear than we don’t need to have flipped push anymore. People are coming to us ix sigma didn’t work for us. We did it for two the pyramid, now and we train and advise them. They years, starting in 2007, but it didn’t deliver. putting people are coming from all over REAAL, we are S Management thought of it as a nice “solution” to on top, and becoming one company. our problems, but did not believe in it. support is now We are teaching people to become lean I already was a Master Black Belt when I read The Toyota building up believers, and to work on our projects Way. I immediately thought that this was what we were quickly. Once with commitment. Within three projects, looking for, although there wasn’t much information on you get 20% they become fully independent: we lean in our sector, as opposed to so much on six sigma. from the team are in the lead for the Our group became a lean team. We successfully led small of the people first one, we supervise them as they projects concentrating on what it meant for people and on board, do the second one, and they are able management to change the system, which at that time it becomes to deliver the third one on their own. was heavily based on a command and control approach. unstoppable Lean has to be of the people, it doesn’t have to stay with us. When more people This time, management really bought into the initiative are needed in the projects next year, and adopted the lean philosophy (the new head of the the organisation will be able to deliver company had seen lean in action in Japan). Now we have without hiring extra workers. 21 internal consultants within the lean team. Transforming people who have worked The approach we took looks at the entire value stream, and thought in a certain way for a long from data entry to acceptance. We coach managers and time is incredibly difficult, but we are employees, and we have KPIs to assess the effectiveness doing it throughout the company. We of meetings, all to ensure that we are achieving our goals started with a pilot project, and then and those of our clients. Our plans start from the client extended the principles to the entire and go backwards through the value chain, using PDCA. business. Our motto is: LEAN=DO!
www.leanmj.com | May 2012 33 IT’S A LEAN WORLD Netherlands Costs down, quality up
from our customers. A survey among employees showed also points of improvement concerning the management. One of the main problems was lack of information and communication. Customer requirements weren’t always met. They were not communicated. The whole process was very complex, and we simply had to change the way we did things at Naturelle. A newly formed management team determined lean would be the way to do it.
We started to monitor our processes: we analysed customer demand, and established the lead times and quality specifications we needed to respect. This way we were provided with the necessary information at any given time, and therefore we could start to plan more accurately. At the same time, I concentrated on people on the shop floor, who didn’t participate at first. They were never invited to do so. I asked them what was preventing them from performing their job in the most efficient way. I managed to convince some employees that the new system was better for everybody, and it spread. To sustain the kaizens we introduced daily performance board meetings. Lean encourages you to think, not just to cut costs.
The Greenery is an international In two years we have dramatically changed the way we work, by reducing overtime and lead times; due to the fruit and vegetable supplier. creation of flow we process ginger 35% more quickly All year round, it provides than before, for example. Besides, we introduced a pull system and kanbans are used between internal a full, day-fresh range of processes. The layout of our facility also changed. We fruit, vegetables, mushrooms used to have one storage room, with cold air coming in from one side and warm air from the other, which and potatoes to its clients: isn’t ideal to store soft goods. We divided it into four supermarket chains, wholesalers, caterers and refrigerators with different temperatures, to best keep fruit and vegetables and ensure quality while adding the processing industry. Donny van Dam, plant more than 25% extra pallet storage spaces. Because manager at organic division Naturelle, shares of this additional capacity and the reduction of packed inventory by 70% we didn’t need to rent additional with LMJ the company’s lean journey. warehouse space anymore. These changes led to substantial cost savings and improved quality.
aturelle works with a cooperative of 30 Dutch organic producers. Our producers are the first link in the chain, thus We supply around 80 customers, mainly based in the communication with them is critical. Our head of quality N Netherlands, but also in Germany, Belgium, France, England and actively engages with them, helping them when they Eastern Europe. Supermarkets want a complete range of products all need support and making sure customer requirements year round, therefore we have to import from other areas. Our primary are as clear to them as they are to us. We acknowledge goal, however, is to sustain producers in the Netherlands. Transportation the importance of seeing the whole value stream: for within our supply chain is conducted mostly by our own road example, we ask our producers to use the boxes the transportation company. On a busy day there are over 200 lorries of The customer requires, so we won’t have to repack. Greenery on the streets. Introducing lean already paid off substantially: we Until recently, our performance at Naturelle was challenged to improve: reduced our operational costs over 2011 by € 1m, an we had logistics and quality issues, and we were receiving complaints overall improvement of more than 19%.
34 it’s a lean world Incremental improvements
Freek Dekker, manager of the radiotherapy department at Erasmus MC, the largest university medical centre in the Netherlands, talks about how lean is used to enhance patient care, and how it was a visit to a paint manufacturer to finally get management on board.
hree years ago, in the radiation oncology quick solution – a small catch – that has since been department, only eight linear accelerators out applied to all the accelerators. T of ten were working, while the entry waiting list increased. We needed to find a way to staff them with We started from the bottom up, but we eventually less people. We had heard about lean, but simply ensured full support from management when forcing a golden standard upon our employees wasn’t 150 people from the department visited the going to work. manufacturing site of paints and coatings specialist AkzoNobel. We saw 5S, kanban and how the company We needed a different method. After I took the lean managed to increase output without extra people practitioner course at the Lean Management Instituut, or big investment - which is what we were striving we realised, through training and kaizen activities, that for. The visit really opened the eyes of our managers, only 50% of our time was used to actually add value. and helped them to make the leap of faith and There were people sitting around and waiting to perform believe that we could actually improve patient their job, and a sense of urgency to change quickly experience through reducing lead time. started to spread in the department. We developed a management The real challenge for us was to keep focus on our A3 during a full day with the interaction with patients. We simulated our radiation management team, and we held our process with less operators by removing the waste of first Improvement Week in October: waiting time. But we soon found out that if we just did we measured our lead time for so, we were then pushing patients through the process patients with prostate cancer (from the and giving them and ourselves a negative experience. So diagnosis to the first day of treatment). It was 35 days we had to find other ways to cut the waste but not get and we decided to work to take it down to 10 days. that in the way of compassionate care. The kaizen week is the means through which we deliver We are introducing a lot of small incremental our project with our team, which now includes five improvements. We finally managed to reduce the doctors (it used to be only technicians). Our result for number of operators needed for each machine, and all prostate cancer stopped at 15 days, because in the ten accelerators are now working. meantime a new technology was introduced: gold markers placed around the prostate, which can help We are constantly building on small improvements, track and treat the tumor more precisely but that teaching people how to creatively approach a requires another week to make the CT scan. problem. A recent example is a small poka-yoke devised after an incident involving a gantry crashing So we have come to the point we are doing both: small into a fixture and causing a treatment couch to break. incremental kaizen and cutting lead time through week- A meeting of the lean team resulted in an inexpensive, long events.
www.leanmj.com | May 2012 35 Written by John Bicheno The Fifth Column Measures and assessment
This is surely one of the most seductive concepts not only for lean but for management in general. Here follow a few questions:
36 THE FIFTH COLUMN
The ‘Balance Scorecard’ is Does the measure fundamentally a widely used framework, set out to reflect well on the reflecting future activities (like management or to get to the R&D), marketing and customer, truth? (In a recent experience, operations, and money. Does OTIF was reported in the high 90 your measurement system cover percentages based on revised Do you have any ‘lead’ measures, these? delivery dates, but when based or are they all ‘lag’? (Two recent on original delivery promises was experiences showed 100% of Lean is supposed to be ‘end-to- in the mid 30s.) measures were lag.) end’. Do you have measures that cover end-to-end performance? Measures are waste if not Richard Schonberger has written Recall Ohno’s words: ‘All we are properly used. Have you done a about the time horizon for lean trying to do is to reduce the time 5S on your measures? measures: short, medium and from order to cash.’ long. Responsibility should From this, when was the last time reflect this. An inappropriate Is a distinction made between your measures were reviewed? time horizon can lead to measures and targets? A dysfunctional behaviour, such as measure should seek to Since every measure is subject to cutting training costs or ‘letting understand the system, but a variation, how much variation is go’ of experienced staff. target – particularly a stretch ‘common cause’. Where a reward target linked to rewards – is linked to a target, are you How are measures interpreted? may encourage (let us call it) sure that the reward is triggered As a learning opportunity or as a ‘measurement creativity’. by truly superior performance witch hunt of excuses to explain rather than by common cause variances? Only the former is in Deming wrote about the 94/6 variation or external luck? line with PDCA. rule, being that the ‘system’ is the cause of most problems, Following from the last point, how Finally, for lean, do you have whereas people are directly are targets set? For example, if a good strategy deployment responsible in far less instances. you operate across a few regions, methodology, including So is the system being measured do you project an x% growth participation (‘catchball’) at or the person? From this, is target for each based on current all levels and feedback that measurement used to blame performance? But consider: is reviews operations, customer or punish? (One of Deming’s 14 current performance at the high changes, and the measurement points is ‘Drive out fear.’) or low end of natural variation? system itself.
www.leanmj.com | May 2012 37 SPECIAL FEATURE Critical Initiative Support
Grey spaces are a manifestation of uncertainty which results in the incorrect action or no action at all. Critical Initiative Support (CIS) is an effective approach to eliminate grey spaces quickly and solve wicked problems in large-scale, complex operations. In fact, the true power of CIS is that it takes direct aim at eliminating or minimising these grey spaces.
CIS is an approach to implement improvements to high priority aspects of an operation in a relatively short period of time – so a focus on change and execution. There is often a tendency to “admire” a problem via analysis as opposed to actually fixing it. CIS employs analysis, but is heavily biased towards action and tangible improvements. The approach described below was used in Afghanistan with a family of vehicles (FoVs) in use by several military service branches.
The forward deployed supply network for the FoVs was challenged with reducing the cycle time of its Mission Essential Tasks (METs). In this operation, METs included items such as battle Critical Initiative Support: damage repair, capability insertions, and general sustainment. CIS was put to the test in Afghanistan, where on top of improving operations organisational and vehicle complexity, the dynamics of a war zone created significant operational grey spaces. in Afghanistan Critical Initiative Support overview CIS is an approach to address high priority operational requirements. Whether Wicked problems and grey spaces dealing with production, maintenance, or a back-office service, needs can typically be distilled down to a need for compressed cycle time, higher output Tim Clancy and Adam Sommers of IBM Global volume, right-sized inventory, or an increase in quality/effectiveness. The Business Services explain how an approach called requirement is “critical” in that it can be Critical Initiative Support (CIS) can help bring clearly linked back to the organisation’s overall strategic goals and that it is change about in difficult situations where results are something that requires immediate needed quickly. implementation. The bias for CIS is towards achieving tangible results with a relatively low-tech approach. eographic dispersion, functional silos, leadership turnover, limited time and disparate perspectives all contribute to the creation of “wicked problems” The approach to CIS is to create a G – obstacles in the dynamic environments that mission focused organisations structure consisting of three elements – operate in. These types of problems are difficult to diagnose and lead to operational a core team, a sustainment team, and a “grey spaces.” These are simply aspects of a task where the process, ownership, or senior leadership group. The core team generally accepted business rules seem to break down. engages the operation in a hands-on,
38 SPECIAL FEATURE Critical Initiative Support SPECIAL FEATURE
efficient manner to quickly identify Capital – Avoid capital expenditures – within which they can have healthcare and implement the fix; the sustainment work within existing facility footprint, delivered? Except in this case it was a team supports implementation during no new capital equipment. As with combat vehicle and the hospital bed was the core team’s absence, and the labor, working with the resources in a maintenance bay and a team steering group reinforces performance place tends to lead to more rapid and of workers. goals and conducts reviews. This actionable solutions. structure is highly effective at coverage Key to addressing operational seams since the core team can rotate through Training – By co-developing solutions and grey spaces is change management key nodes of an operation’s network with people actually doing the work, to ensure buy-in of the proposed while the sustainment team can training needs are minimised. A solution. To achieve buy-in, Critical follow-up from behind to facilitate collateral benefit is the problem solving Initiative Support efforts take a number ongoing implementation. mentality that is instilled at the site. of measures: Good solutions help drive a continuous Improving the operation is a hands- improvement culture which can yield Pre-core team effort –skeletal on endeavor which draws upon the even bigger improvements over time. data collection/analysis is conducted best suited methodology, rather than and shared with the operation in subscribing to just one. For example, In short, solutions are results-driven question. Review of goals, approach, basic lean techniques may be required innovations that work within existing and resources required is conducted to eliminate waste/improve flow, but assets and resources to improve the with the operation to “prepare foundational industrial-engineering operation on a rapid timeline. Gathering the battlefield” and eliminate techniques may be used to standardise data that might point to longer-term non-starters. procedures. This is a key feature of CIS engineered solutions (additional because the implication here is that, infrastructure) is a secondary goal, and in some instances, effective fixes can then only if there is a defined path that be executed simply by using common would benefit from the effort. Improving the sense. This maximises the arsenal of operation is a hands-on Eliminating the tools available and avoids the trap of endeavor which draws force-fitting a methodology into an grey spaces incongruous situation. Described earlier, grey spaces are upon the best suited simply opportunities for work not to be methodology, rather than The nature of CIS is to solve high priority accomplished or not get done the right subscribing to just one operational problems in a relatively way. For example, the involvement of short time period. numerous OEMs and service providers resulted in no singular ownership of Therefore, solution sets are governed by a inventory or tool management. The Sustainment team – the purpose of few parameters: supply shop managed inventory prior to this team is to reinforce solutions, aid it being dispatched to the sustainment in implementation, solve issues and On-site work – No solutions from bays; each contractor then managed serve as continuity during the core afar. The core and sustainment teams the inventory in the bays, and much team’s absence. take a boots-on-the-ground approach. inventory fell into a grey space, where Working in conjunction with site full accountability was unclear as to who Enterprise collaboration – besides leadership and the resources actually owned managing and maintaining the extensive collaboration with on-site doing the work, solutions are quickly inventory. This operational grey space, in stakeholders, the core team includes a developed. turn, resulted in wasted capacity, delays resource that remains in the continental in locating parts, and a lack of overall United States. This role provides a hard- Rapid – Improvements at least partially flow – all stemming from clutter and wired connection into the enterprise realised before the core team leaves all contributing to longer cycle times. support functions for follow-up, and fully realised according to a Another example was in the allocation communications, and awareness around defined schedule. The sustainment of bay spaces where vehicles could be changing landscapes. team provides guidance after the initial worked on. Because different contractors work, as well as a window back to the and OEMs were often contracted to Commander selects courses of senior leadership group. perform a specific functional task, bay actions and provides guidance – assignments were initially made on a Involving the site commander in Labor – Solutions cannot add headcount contractor/OEM basis – vacancies could selecting the final courses of actions in an attempt to overwhelm a problem. be a problem. This is similar to the (COAs) and issuing it as commander’s The essence of CIS is to work with the classic Hospital Bed simulation problem guidance or intent is critical for resources in place to develop highly of lean. With a varying rate of incoming change management; like an implementable solutions and not to patients with unknown needs, how executive wall walk at the end of throw resources at the problem. best to manage available hospital beds a kaizen.
www.leanmj.com | May 2012 39 SPECIAL FEATURE Critical Initiative Support
Figure 1: How time on task and time to task notionally affect output the time available to conduct mission based on TDA authorisation support and mission delivery.
Time on task – The percentage of all available time that is focused on true TDA Vacant slots 5 Staff 45 value-added work, as opposed to non- authorisation 50 - = value added work. Time to task – The amount of full-time equivalent (FTE) time it takes to produce each unit of value-added work. Full time Staff 45 Time on task 50% equivalent (FTE) Improving output is a function x 22.5 of maximising time on task while = minimising the time to task of value- added work. The effect of increasing time on task is similar to adding headcount, and reducing time to task Time to task 2 Units produced FTE 22.5 increases the output of every FTE. FTEs per unit 11.25 This is illustrated in Figure 1. Without / = understanding the two factors, simply adding more headcount will not result in Actionable measurement – most an improved process. operations over-generate reports or data. The team seeks to eliminate non- Improving time on task begins with value added reporting and develop a identifying 8 wastes and conducting minimal set of actionable measures accelerator drills. The 8 wastes of lean that directly supports the operation. are traditional sources of non-value added work and activity. Reducing their Senior stakeholders are engaged on site impact serves to increase time on task. and via the steering group to further Accelerator drills are exercises that ensure commitment. The team develops aim to reduce the time to task on a a lean six sigma styled charter that specified unit of value-added work. For clearly identifies the problem, scope/ example, if it’s value-add to strip battle boundaries, anticipated benefits, and damaged armor in 10 hours, being able to the schedule to reinforce what needs to accomplish the same task in four hours, be done. without sacrificing quality, will result in The approach increased throughput. We found that Selected CIS by combining time on task and time methods: to CIS is to create a to task assessments, as well as on-site CIS has to be adaptable to a host of structure consisting of improvements aiming to either increase environments and practitioners must three elements – a core time on task or reduce time to task were pull from a wide body of knowledge, team, a sustainment very simple and effective to implement in using methods ranging from lean and an austere environment. Our approaches six sigma to complex systems theory, team, and a senior are summarised in Table 1. theory of constraints simulation and leadership group modeling - all may be appropriate to Demand leveling through standard a specific problem at hand. What’s work an additional approach once important is not trying to use the entire assessments and improvements of time toolbox - but picking the right tool on task and time to task were ongoing for the job. A selection of methods is to look at the pacing and rhythm of from the lean body of work and their work assignments, and how components application follows. of standard work could be developed to smooth the flow of the process. For In a resource-constrained environment, example, every combat vehicle that additional labor is not readily available. arrives at the maintenance facility will Time on task and time to task analysis have a unique collection of tasks. Each are two lean-based methods of CIS sub-task however can be standardised to inform leaders how their staff uses to a collection of material requirements,
40 SPECIAL FEATURE Critical Initiative Support SPECIAL FEATURE
labor, and tools for that sub-task. Even if 100% of the overall task cannot be comprised practical way that doesn’t leave all the of standard work sub-tasks, the Pareto rule applies. Leveraging the 80/20 rule to identify “hard” work to be done at the same time. which sub-tasks to create into standard work first can result in a significant impact to Flexibility is important in an expeditionary reducing time to task and increasing time on task. Demand leveling further identifies environment where customer demand the different kinds of MET based on difficulty, categorise them by the time to task cannot always be forecasted accurately of the workload, and balancing the demand level so that a consistent steady flow of and the enemy gets a vote. outputs is provided as it is needed when it is needed. Demand leveled systems are more flexible to changing needs and more productive by mixing “easy” and “hard” work in a Kaizen workouts or rapid improvement events – Bringing CIS methods together Table 1: Time on task and time to task in a short period of time, with no time or mandate to train, and with a goal of 8 wastes physical and virtual that Steps to accelerator drill to reduce actually improving a pain point is difficult. reduce time on task time to task However by leveraging kaizen or rapid Overproduction - Output of Observe – What steps are needed to improvement event (RIE) approaches, this products or service beyond what is complete a VA task. can be accomplished. This is why having needed for immediate use. expeditionary resources is key – the work cannot be done remotely by a solution Transportation - Unnecessary Split – Divide the process into team in the rear. Like at any gemba, the movement of materials, products or moving/stopping steps and internal/ team needs to travel to where the work information. external steps. is, joining workers to create the solutions. “Moving Steps”: What can be done This further aids in change management, Motion – Excessive movement of without stopping the process. as the workers helped to create the a worker to perform the work or Example: Getting fast food and solution and presented them as courses obtain information to proceed on eating it while driving – trip of actions to the site commander, when the work. continues the commander selects a course of inventory – The accumulation of “Stopping Steps”: What can be action and confirms it through command inventory – either physical assets, done only when the process is guidance, thus validating the effort. work in process or knowledge stopped centers that is idle, underutilised or Example: Eating at a sit down obsolete. restaurant – trip stops “Internal Steps”: Work done during Because different waiting – Any delay between the process contractors and OEMs when one process step ends and Example: Sharpen the knives were often contracted the next one begins where no work just prior to turkey carving while is being done. everyone waits to perform a specific “External Steps”: Work done outside functional task, bay the process assignments were initially Example: Sharpen the knives the made on a contractor/OEM night before so no one needs to basis – vacancies could be wait prior to carving a problem defects – Any aspect of a service Convert, simplify and overlap that does not conform to customer Convert stopping activities to needs. moving ones and internal to external. Internal activities that Bottom line cannot be converted should CIS is a practical approach to improving be simplified. Make activities operations, especially when there are concurrent or overlapping rather high priorities facing a tight timeline. The than sequential whenever possible. approach is proven in theatre operations. It uses a mixture of coordinated small improper utilisation – The expense Test and document – Use time trials teams, best-of-breed methodologies of having the wrong person perform to test new process, note where it as needed, and a hands-on philosophy a specified task (over skilled or works and where it doesn’t, tweak to create tangible improvements. The under skilled) and/or not having the as necessary. Aim for a 30-50% low-tech, high-touch nature of Critical right tools for the job. reduction in cycle time for each Initiative Support is ideally suited to the accelerator drill. austere conditions found in Afghanistan. Mind – The expense incurred by Repeat – Repeat accelerator drills However, it is a powerful approach not having all heads involved in to continue reducing time to task at for any operation looking for visible, solving a problem. each iteration. measurable results.
www.leanmj.com | May 2012 41 LEAN DIARY Safety matters most
Safety matters most e have previously said:”We have WHY? Countermeasures will attack identified some initial resistance. the problem and decrease/eliminate it. SCGM’s W People fill in the charts when WHY? Decrease the losses = increase they realise they are essential, but do it the profit = everybody in the CEO, Sandra irregularly; they mark the stoppages, but company benefits. Cadjenovic, don’t write why the stoppages occurred.” We did realise that this was our biggest Among the results, we received excellent gives us an problem concerning OEE data collecting feedback from people and no more account of – workers have been trained on WHAT to unidentified losses in the charts. The do, WHEN to do it, HOW to do it, but the main losses have been identified: long what the company has idea of WHY they are doing it was a stops due to internal tool change time. accomplished on the mystery in their minds. It was upon us to Therefore, we made a video and we will guide them. analyse it together with the operators. field in the last month. Four more people will join the SCGM Therefore, people got detailed family: they will be trained to give the explanation on why to identify the support to, for the moment, only three losses is so important. colleagues taking care of SMED. WHY? To identify losses means to know where the recurring problem is. Now, a clear picture with real numbers WHY? If we know where the problem is, stands on each machine (as shown in the we can thoroughly analyse it. picture) and, apart from our lean expert WHY? If we analyse it, we will be able who is giving us great support, we expect to define countermeasures. help from the operators in accomplishing
42 LEAN DIARY Safety matters most LEAN DIARY
STEPS ACTIVITIES TOOLS WHEN WHO status 1 INITIAL Introduction to 5 Steps of the Safety Presentation Ppt 15-Apr Jelena P. P SITUATION Creation of the Safety Team Safety Board, meetings, 28-Mar Dragana P ANALYSIS minutes Description of current situation Safety Board 15-Apr Sandra P Gap analysis in documentation Check list 30-Apr Dragana P Gap analysis in the workplaces Check list 30-Apr Dragana P Accident mapping Heinrich pyramid layout, 30-Apr Jelena S. P body parts, green cross Risk mapping Heinrich pyramid layout, 30-Apr Jelena S. P body parts, green cross Summary of collected data Chart on the Safety Board 30-Apr Sandra P Identification of Key Safety Indicators Accident notices, 15-May Dragana P (KSIs) graphics, Board Establish operational objectives Safety Board 15-May Dragana P Establish profit objectives Safety Board 30-May Dragana P
our next tasks. After all, they are our best consultants when it comes to the shop floor. Dragana TEAM LEADER 5S Recently we put a lot of effort into deploying 5S on the shop floor, which was rewarded during a visit by an important and highly regarded customer of ours. We received positive, motivating and highly encouraging comments. It was proof that we are heading in the right direction; a tailwind for us to speed up, improve and Sandra Danijela Jelena Dusan sustain what we are doing. OFFICES ASSEMBLY MOLDING TOOLSHOP SAFETY During our last visit to SCGM, we had an opportunity to see the scheme three phases and five realising what the current situation is. Thus, our starting of the house we are embarking to steps: point is Actual Situation Analysis. build. Foundation made of continuous improvement and people – check. Next 1 REACTIVE People rolled up their sleeves and got to work, creating step is to start making bricks and add Actual situation the masterplan for the first safety brick, with the them to pillars. The first pillar in a row of analysis; assistance from the consultant. You can see the outcome eight is safety, health and environment. Elimination losses in in the figure. Keeping their employees safe and healthy operational flow; in a non-hazardous environment is what Evaluation and Apart from the masterplan, a safety-building team was the steering committee recognises as standardisation of created. There is one pillar leader, and four other people, the most important and must-take-care- identified solutions; each chosen from different areas: offices, assembly, of part. Yes, one would think that it is 2 PREVENTIVE molding, tool shop, with the aim to have the whole a common thing in every company to 3 PROACTIVE company covered. ensure workers’ safety, and that we were merely “re-inventing the wheel”. What As you can see, the It is upon the team to analyse what the risk- and makes the huge difference is that this is Reactive Phase is the first accident-prone places are and mark them in the safety according to lean. What does it one, divided into three layout of the company; to make a gap analysis, which mean? It implies having the step-by-step steps. One cannot make would show via graphs where we are now and the organised structure, which consists of improvements without gap we need to overcome in order to reach the goal,
www.leanmj.com | May 2012 43 LEAN DIARY Safety matters most
according to the safety standards There are things to do, people responsible for doing needed; to identify KSIs and direct us them, and a deadline by which assignments have to towards accomplishing them; to hold be executed. meetings in order to follow up the activities and develop the action plan In the next article you will have a full report on our next based on the results. activities. Till then, stay (lean) with us! BK 2500/800
Losses Percent of equipment effectiveness
Long stops Material problems Stoppage due to tools Engel
Losses Percent of equipment effectiveness
Long stops Stoppage due to tools Superior force TM 1000/350
Losses Percent of equipment effectiveness
Machine breakdown Long stops Stoppage due to tools
44 LMJ IN CONFERENCE
in conference
LEAN MANAGEMENT SUMMIT
Amsterdam; March 19-21
ith so many “lean events” becoming a companies’ problems with the coaches), Professor hunting ground for vendors, it was refreshing Daniel T Jones held an insightful presentation on W to attend a summit offering information-rich seeing the whole value stream. This offered examples and case study-based sessions that did not come with like Tesco’s (and its aim to guarantee 100% product a sales pitch at the end. availability at any time), Toyota’s (whose model of supply Tesco successfully followed and applied to its The Lean Management Instituut (the affiliate of the own characteristics) and Hugo Boss’ in Turkey. Mr Lean Global Network in the Netherlands) has done Jones said that the future will see regional supply a wonderful job in organising these three days of chains, while warning: “You get the supply chain you workshops, presentations and networking, which deserve, through the information you send it.” brought together the Dutch lean community and proved that there are lessons to be learned from Michael Ballé, author of The Lean Manager, promised companies in any sector. to deliver a presentation on lean in seven and a half slides (which is, in itself, pretty lean): he reminded I could not attend all the sessions of course - my the audience that we shouldn’t want to do lean, we Dutch is a bit rusty - but I had a chance to speak to should want to become lean. He then concentrated some of the companies that presented their stories on five efforts any company should make: following to a 130-strong audience gathered in the conference customers; accelerating flows with levelled pull; rooms of the Dorint Hotel, near the busy Schiphol developing people; involving operators in improving airport. Their stories were inspiring, and told with ergonomics; and going and seeing at the gemba. After incredible passion. Check out our It’s a lean world all, he concluded, lean equals kaizen plus respect. special on the Netherlands (page 30) to read about the lean journey of companies like Erasmus MC, Samuel Obara, one of the best speakers at the the country’s largest university hospital; insurance summit, held two interesting and engaging sessions company Reaal; and Klasse.pro, whose project to on Toyota, and shared the four capabilities any lean bring continuous improvement into elementary leader needs: designing work so that problems schools is of great interest, especially when you think are immediately obvious; attacking problems that most attempts to adopt lean in education are when they occur; sharing learning laterally; and limited to universities. developing people.
After hosting an intimate and thought-provoking There was even the time to teach the audience how session of Sensei Coaching with René Aernoudts, to write (or draw) the Japanese word “kaizen” – I president of the Instituut (about 20 attendees sat in didn’t do very well, but it was good to learn more on a semi-circle around the stage and discussed their the concept from a visual perspective.
www.leanmj.com | May 2012 45 BOOK REVIEW
Jacob Austad reviews John Bicheno’s The Service Systems Toolbox, Integrating Lean Thinking, Systems Thinking and Design Thinking, PICSIE Books.
r. Deming once said: “We know easily assumed that we need to manage of knowledge and what we said, we don’t know waste. With help from Russell Ackoff, information. Actually, D what they heard.” In the John Seddon and Deming, John makes us leaving the book at the evolution from believing lean is merely a think differently: shelf is a shame; it should set of tools to learning that it all starts at be within reach of any the point where we understand the leader, lean practitioner, bigger picture, John helps us to better systems thinker and understand the message. Don’t manage cost: manage anyone else wanting to value. When value increases, make things better. A Service System is exactly a system the costs will decrease. […] Go and should therefore be seen from for flow and costs decrease, but A book review should different perspectives; hence the ironically, go for cost reduction also point out the things book covers the same aspect from and costs are very likely to that need improving, but different angles. Some readers might increase! Why? Because a cost - to be quite honest - the (at first glance) find the repetitions focus often brings worse service only thing that should unnecessary, but after reading again that backfires through increased be changed is the last they will understand what the author failure demand. sentence of the author’s is trying to convey. acknowledgements.
John provides different perspectives Dear John, don’t be so and lets the reader find the solution This book is not just another input to hard on yourself with all matching the specific problems. the lean or systems debate; instead, it the work you do to help This approach is extremely rare and gathers evidence that many people try us all to think better, makes the book more of a lexicon and to do better and that by sharing different errors are hard to find. compendium while at the same time thoughts we all learn and have the Personally I cannot wait engaging and encouraging readers ability to build more knowledge. for you to learn more, to find their own solutions – not just and inspire us more. copying tools. At the end of every section the author always references the sources and There is no need for The book helps to better think and this thereby encourages readers to learn a book summarising also goes for explaining the fundamental more (or go see for themselves). the top 100 lean and lean principle of value. We have all better thinking books learned that the elimination of waste Having this book on your bookshelf – it is already here, but will increase value and therefore it is will ensure you have access to a wealth covering so much more.
46 LETTERS & COMMENT LETTERS LMJ & comment
chains around products (and not vice versa) and shape buying behaviors Be integrative to be sustainable through technology innovation. change management is not necessarily the strongest component of Today’s leadership challenge is to In the third leadership in the supply chain and successfully transform the linear manufacturing business. business supply system to the article of his customer into an end-to-end set of series, Roddy The transition from push-driven processes starting with the buying Martin, senior efficient supply systems constrained customer. Linear supply systems by cross-functional visibility, a cost focused on forecasting and reliable vice president, reduction focus, and a focus on supply must build the agility to global supply functional outputs challenges the profitably sense and shape demand in chain at Competitive status quo in traditional companies a value network. (especially those that operate in a long Capabilities International, connection of business to business The implications are not trivial and draws the conclusions partners) that don’t necessarily “see” require a change in leadership and on how to fully transform a buyer of the end product or service - performance management. While cost a supply chain into a for example, industrial manufacturers efficient manufacturing is important, and suppliers - and changes many customer service levels and account demand-driven system aspects of the business we regarded as profitability are what really counts in that can ensure sustained a given: the business results. competitiveness. Metrics; From previous articles I wrote, a few Processes; fundamentals are cornerstones: Functional goals and collaboration uilding global capabilities agile processes; 1. This is a transformation journey; enough to scalably and Information technology and 2. Understanding maturity in B profitably meet rapidly information management; performance improvement initiatives is changing global and local demand and Organisation design and supply chain critical; risk has pushed leading manufacturers skills. 3. Understanding the fact that the to critically examine and transform business has four interdependent their approach to end-to-end supply Underpinning the challenge and management systems that must be chains. These initiatives are being led amplifying the priority is the fact synchronised and aligned – three being top down by the most senior leaders in that requirements for agility and technology focused and the highest the business. responsiveness to market change and being the business operating system risks on both the supply and demand and the way the business actually Even at a functional leader level, recent side of the business are critical to its operates. Business change cannot studies among business and supply survival and success. continually be accommodated in the chain executive peers are pointing to technology and must be supported the fact that there is broad recognition Leaders like P&G, Cisco, Unilever and by a flexible business model based that the end-to-end supply chain is Dell, to name a few, are already on information and decision support layer. the business operating strategy, is a this transformational journey and are critical capability in the competitiveness leading the strategy from the top of All these elements are such important equation, and that current supply the global business. measures of business competitiveness chains must be transformed as a top that leaders are developing the business priority. The challenge is that The capability to sense and translate business operating strategy to be the change is transformational because demand changes as they occur into guiding execution framework that it fundamentally impacts the way desired end-to-end business outcomes prioritises work and governance to the business currently operates and is lining up to define today’s leaders. build the end-to-end synchronised prioritises work. We all know that Think Apple and how they build supply supply chain process capabilities.
www.leanmj.com | May 2012 47 LETTERS LMJ & comment
This has generally always been the case, but today’s challenge lies specifically in “integratively” executing all people, process and Lean six sigma technology elements of the business operating strategy in aligned and synchronous execution programmes and initiatives. Integration must be a is sufficient but not enough!
In particular, it’s not an easy task to connect people, process, and waste of energy technology dots across the business and build new sustainable process capabilities through projects and a project management office (as stated in a previous article). Leaders like P&G, DuPont, Joseph Paris, Toyota, and Kellogg’s have built integrative improvement chairman of management systems to guide the transformation journey. XONITEK says The integrative improvement system codifies the transformation of continuous traditional supply chain, IT, human resources, demand planning and improvement continuous performance strategies and functions into end-to-end initiatives need process capabilities. Integration of a set of projects and systems focused on cutting costs and improving functional cycle times is no stewardship to be longer enough! successful.
“Integrative” is a new term, but one familiar to the life sciences industry. It refers to the following recommendations I made in the t seems that everywhere I look last two LMJ articles: – every article I read, every I subject matter expert to whom 1. The transformation journey is multi-year and top down across the I speak, and every talk to which I listen end-to-end business; – the message appears to be the same: 2. The journey must simultaneously accommodate and address globally lean six sigma fails. Depending upon different markets, cultures, and states of change readiness across the the source, lean six sigma initiatives business; might fail 25% of the time or even 70% 3. Integrative improvement means systematically progressing along of the time. Some even claim that it performance improvement capability stages while maintaining never fulfills its promise or realises its goal alignment and business process integration at every stage of potential. In fact, there are so many the journey. This all while the business keeps operating (not unlike articles and lectures on how often and changing the design of an airplane while it is in flight); how much lean six sigma fails that it is 4. Systems, enablers and platforms such as IT, organisation structures, amazing anyone would even bother to change management, and CI must evolve with the stages of try to implement it, or otherwise select performance improvement maturity. it as a path for improvement.
Leaders already on this journey have been working the “integrative As a long-time member of the angle” for years. Institute of Industrial Engineers (IIE) and being on the Advisory Board of The net result is that these businesses are already seeing outcome its Process Industries Division, as results. For example, one leading consumer goods company well as being on the Advisory Board returned 300% of the business impact of a stock out problem back of Binghamton Universities System to the business by looking end-to-end. This return was used to fund Science and Industrial Engineering (SSIE) the business transformation. Department, I have been intimately exposed to the material on the subject The key takeaway is to deploy an integrative improvement system being taught and decided to investigate that codifies the capability building journey and guides the the “root cause” of such poor results transformation work across the business. being reported and the increasingly poor
48 LETTERS & COMMENT
expectations associated with continuous and how to wield it for maximum Merriam-Webster defines “stewardship” improvement initiatives. effectiveness. And I would also support as “the conducting, supervising, or the vision painted by the proponents of managing of something; especially: the During this exercise, and for both what could be achieved. careful and responsible management of academia and industry from sources something entrusted to one’s care.” around the world, I examined the But the one thing I noticed in almost all curriculum offered and reviewed the of the material I reviewed - very subtle Unlike leadership, which is removed books and other materials used in the in nature, but with a profound impact from the details, and unlike being a teaching of the disciplines associated on the results - was that the consistent practitioner, which is all about the with CI in general, and lean six sigma in references to the singular. There were details, stewardship is a cross-over specific. I also examined the websites many mentions of “you” and of “me” function that bridges the strategic, and articles written by practitioners and and of “I”, but very few to “we”, or to through the tactical to the logistical. To consultancies (including my own). “us”. It is almost as if any results that be a steward, you must have something might be achieved in a continuous entrusted to your care – and you must Almost all of the material I read referred improvement programme are solely the be careful with, and responsible to, to the forensics of the disciplines – a consequences of an individual’s efforts that which has been entrusted to focus on the “how”, including the “tools” and not that of a team – not to mention you. As a steward, you are not only of the trade and the “methods” of their an entire company. If leadership, “conducting”, as a practitioner would; leveraging and deployment. One book programme management, and you are also supervising and managing, had an emphasis on 5S, another on VSM, communication skills are mentioned at as a leader would. And as a steward, kanban, kaizen, and so on. Another book all, they are usually given short shrift and you are not alone – but a member of went at great lengths to talk about the tucked towards the back of the book. the community over which you preside; importance of flow and roadmaps. And a community that depends upon you as every book I read made some reference Maybe all of this is natural. There is much as you depend upon it in order to the miracles performed at Toyota and an obvious distinction between being for both to be successful. advocated how they can be replicated in a “leader” and being a “practitioner”. any business anywhere. The leader mainly operates above the Which comes to my recommendation: details and has a propensity to think I believe that addressing the need for Which brings me to the other underlying strategically with sights set beyond stewardship and teaching stewardship theme that was shared in everything I the horizon. Whereas the practitioner skills are critical to the success of read: the “why”. All of the books and lives more in the here-and-now any CI programme. Stewardship materials I have read and the lectures I with an emphasis on training and establishes the necessary precursor have attended have discussed in great experience that is more logistical and environment only through which the detail the benefits of embarking on tactical in nature – the person who full achievement of the benefits of such programmes. All of them create a implements the strategy. And perhaps any CI programme is possible and vision of a better place – a better set of this is why the material written about will result in the realisation of the conditions under which a business might leadership does not delve deep into maximum potential reward associated operate and the great benefits which will the requirement details of continuous with leveraging the tools and methods be realised as a result. They all create improvement and lean six sigma – of lean six sigma. I also believe that a very compelling and pretty picture of and the material written about the teaching of these stewardship skills what the world can be like if only we continuous improvement and lean should be moved to the front of the embrace the disciplines of lean six sigma six sigma does not address the curriculum and materials – and not as the approach for a CI programme. importance of effective leadership as an elective or after-thought. As an and the required skillsets. individual member of the community All of this knowledge and instruction – whether your role in a project or a is necessary, well and good. I would In my opinion, herein lies the “root business is that of a practitioner or support any argument that it is cause” of why CI and lean six sigma that of a leader – the steward will important to know how to properly use initiatives fail to realise their full ensure everyone is working as a the tools in your toolbox; which one potential. In a word, stewardship. Or in team. And working as a team makes to grab under any given circumstance this case, the lack thereof. all the difference.
www.leanmj.com | May 2012 49 events There is currently an expanding pool of events available for the development of the lean community. They offer both general and sector specific opportunities to renew your enthusiasm and gain new perspectives through communicating with lean contemporaries. LMJ eve n ts in cl ud e : LMJ Annual Conference 2012 May 29-31, The Hilton Metropole, Birmingham NEC The Manufacturer www.leanmj.com/annualconference of the Year 2012 The Lean Management Journal invites you to the flagship event for Call for entries lean and continuous improvement professionals. Speakers from North America, UK, Europe and South Africa will give an international The Manufacturer of the Year Awards 2012 is a dimension to this year’s conference as they share the latest insights, rare chance for you, your team and your company best practice and thinking in three days of unrivalled personal to receive industry-wide recognition for your development. achievements. The World Class Manufacturing Award is one of the most heavily competed New features of the 2012 Annual Conference include: categories of the awards and recognises the manufacturing plant that is achieving the highest Ideas Exchange Sessions, informal group sessions to exchange best levels of operational excellence. The Awards practice tools and techniques; programme entry deadline is July 31, site visits will take place in October and the Awards Ceremony Post-conference workshops followed by site assessment visits; and Gala Dinner in November. For award enquiries and further details, contact Laura Williams on Lean Leaders Networking Dinner on Tuesday 29th May. 01603 327006 or [email protected]
Now in its third year, the LMJ Conference helps you understand the fundamental concepts you need in order to improve your way of doing business and achieve excellence, drawing on best practice from organisations and lean leaders and focusing on the integration World Class of both lean and systems thinking. Manufacturing Day One 29th May: Main Conference Factory Tour Speakers include: Steve Welch, group continuous improvement May 22, New Holland Agriculture, Basildon manager, Yeo Valley; Peter Watkins, global lean enterprise and excellence director, GKN; John Bicheno, director of MSc Lean Winner of the 2011 World Class Manufacturing Operations, Lean Enterprise Research Centre; Gwendolyn Galsworth, award, New Holland Agriculture (part of the CNH p resident, Visual Thinking Institute; Richard Holland, managing Group) will be providing a unique one-day event director, TBM, UK, India & South Africa; Bob Hafey, president, RBH combining a best practice site tour together with Consulting; Bill Bellows, president, In2In Thinking; and Dr Nick Rich, a deep dive development session to illustrate honorary fellow, Cardiff Business School. the World Class Manufacturing Pillars that have helped the company to achieve world class status Day Two and Three 30th & 31st and to be crowned winners of this coveted award. Thinking for Lean Workshop – 30th May Delegates will have the opportunity to see how New Holland Agriculture has and continues to Lean Accountancy Workshop – 30th May implement WCM - and to be on the never ending road to developing a continuous improvement Lean Safety Workshop and Site Assessment Visit – 30th& 31st May culture within its plant. By seeing the tools in action and talking to the pillar champions, Visual Thinking Workshop and Site Assessment Visit - 30th & delegates will have a clear understanding of the 31st May building blocks the plant is using to construct a truly world class manufacturing operation. To For delegate enquiries, please contact Benn Walsh on 0207 202 7485 register a place, please contact Benn Walsh on or email [email protected] 0207 202 7485 or [email protected]
50 forthCOMING EVENTS
O t h er eve n ts in cl udE: 2ND INDUSTRIAL LEAN PRODUCT AND LEAN HEALTHCARE TRANSFORMATION PROCESS DEVELOPMENT SUMMIT (LEANPPD) WORKSHOP June 6-7, Minneapolis, Minnesota June 14, Cranfield University At the 3rd Annual Lean Healthcare Transformation Summit, you will learn how The objective of the workshop is to showcase innovative experiments are changing the way we deliver and pay for healthcare the state-of-the-art methods and tools, as and how consumers and employers are driving a healthcare value focus by developed by Cranfield University (sponsored demanding transparency of cost and quality data across the system. You’ll learn by EU-FP7) based on action research with the from thought leaders and pioneers forging new paradigms for the healthcare industry. This can enable the organisations system. There will be special keynotes by John Toussaint, Harold Miller, and John to introduce and implement lean thinking in Shook, coupled with down to earth, real experiments from pioneers forging product design and development. The main new ground every day. Come spend two intense days, learning from thought topics are: Set-Based Concurrent Engineering, provoking keynotes, a topical panel discussion, interactive learning sessions and Lean Knowledge Life Cycle, Lean Design, A3 the industry’s very best networking. Thinking for Problem Solving and Change Management toward LeanPPD Environment. OPERATIONAL EXCELLENCE SOCIETY Several industrial perspectives and case studies will also be presented by speakers from BAE Meet leaders and professionals from your local business community and Systems, Elekta, Rolls-Royce and Visteon discuss the most common problems companies experience in trying to Engineering Services. For more information, achieve excellence. You will go home with many ideas and a lot to think please send an email to leanppdcu@cranfield. about,, and with new interesting contacts. ac.uk or contact Dr Ahmed Al-Ashaab on [email protected] May’s highlights: Warsaw, May 14, 6pm LEAN SIX SIGMA Venue: Terere Restaurant MIDDLE EAST Kazimierz Grabski, LQS Service Delivery Manager at Lionbridge, will give a June 10-13, Millennium Hotel, Doha, Qatar presentation entitled “Operational excellence and dialogue”. For information please contact Malgorzata Krukowska on [email protected] Organisations in the Middle East are continually exploring methods to drive New York City, May 21, 5.30pm productivity and accelerate the operational Venue: I tre merli performance of their organisation. Lean and Leigh Brand of Brand Consulting Group will give a presentation entitled six sigma are strategies being utilised across “Operational Excellence in Government”. For information please contact multiple industries to achieve business agility Richmond Hulse on [email protected] and a culture of continuous improvement to optimise customer processes and service quality throughout your organisation. The Other Operational Excellence Society chapter meetings include: Summit will highlight the use of these strategies in different sectors and departments Munich, May 8, 7pm to significantly maximise your revenue Venue: Restaurant Ludwigs and increase the effectiveness of your For information, please contact Martin Haack on [email protected] improvements. Speakers will include Osama Jbarah of Qatar Petroleum, Mohammed Nasser Dubai, May 14, 5.30pm of Eli Lily Saudi and Anand Venkateswaran of Venue: to be determined Gulf Bank. For information, please contact Andy Gibbins on [email protected]
for up-to-date event information visit www.leanmj.com
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