December 11, 2012 Art Byrne

The Value-Adding Lean CEO

Housekeeping

To enlarge slides, use the expand window icon just beneath the slides and to the right on your display console

To adjust the sound, use the volume control on the console or on your computer

Type questions into the console box

The Lean Turnaround by Art Byrne

Available at lean.org/bookstore

Learn from:

Art Byrne

John Shook

More Speakers, Learning Sessions,

and Companies to be Announced!

$350 Early Registration Discount, register today

Team Discount: Send 4 people and the 5th person is free!

Register at lean.org/Summit

in Orlando, FL

Todays Presenter Art Byrne

Implemented lean principles in 30+ companies

Began lean journey as a GM at GE

As group exec. - helped launch lean at Danaher

As Wiremold CEO - increased value by 2,500%

Wiremold documented in Lean Thinking by Womack & Jones

Now - Operating Partner, J.W. Childs Associates

.

MY LEAN JOURNEY

Started in January 1982

Always from a CEO Position

Looked at It from a Business Perspective

A BUSINESS BOOK

. . . NOT A LEAN TOOLS BOOK

A BUSINESS IS:

PEOPLE

PROCESSES

DELIVERING VALUE TO

CUSTOMERS BEST TEAM WINS

TRADITIONAL APPROACH

Strategy Create Shareholder Value

Take Value-Adding Activities as a Given

Get Customers to Conform to You

Make the Month

LOOKING AT EVERYTHING BACKWARDS

VALUE IS CREATED BY

Improving Your Value-Adding Activities

Delivering More Value to Your Customers Than Your Competitors Can

Conforming What You Do, to Your Customers Needs

THE OPPOSITE OF THE TRADITIONAL APPROACH

PRODUCTIVITY = WEALTH

PRODUCTIVITY = WEALTH

Lean Strategy = Big Improvements in Your Value-Adding Activities

This Creates Growth and Gains in Market Share

Lean is the Greatest Wealth Creator Ever

BUT SOMEHOW WE TOOK:

Just-In-Time

and

Lean Thinking

AND TURNED THEM INTO . . .

Just-In-Time Inventory

and

Lean Manufacturing

THIS IS A TRAGEDY

THE RESULTS

Lean Focused on Manufacturing

Lean Is Just a Minor Part of Strategy

Lots of Companies Trying Not Many Are Successful

LEAN TURNAROUND SHOWS THE WAY

LEAN TURNAROUND PREMISE:

If You Are Leading a Business and Dont Want to Dramatically

Improve Your Results

Then, You Are in the Wrong Job

WHAT CAN YOU EXPECT?

Lead Times Cut from Weeks to Days

Inventory Turns Doubled in Two Years, Quadrupled in Four

Annual Productivity Gains of 15-20%

A 50% Reduction in Defects Per Year

A 50% Reduction in Space in Two Years

A 4-8% Improvement in Gross Margins

Working Capital as a Percent of Sales Cut in Half

Increased Growth by Taking Market Share

Creation of a Kaizen/Team Culture

WIREMOLD RESULTS

Lead Times Dropped from 4-6 Weeks to 1-2 Days

Productivity Improved by 162%

Gross Profit Improved from 38% to 51% Plus 82%

Machine Changeovers Went from 3 per Week to 20-30 per Day

Inventory Turns Went from 3X to 18X

Customer Service Improved from 50% to 98%

Sales More than Quadrupled

EBITDA Grew from 6.2% to 20.8%

Working Capital/Sales Fell from 21.8% to 6.7%

Operating Income Improved by 13.4X

ENTERPRISE VALUE INCREASED BY 2,467%

WHY ISNT EVERYONE DOING THIS?

Tell You

Show You

Bet You Cant

Yoshiki Iwata

EASY TO SAY, HARD TO DO

A LEAN STRATEGY CAN TURNAROUND ANY BUSINESS

You Need a Proven Approach

Three Management Principles

Four Lean Fundamentals

LeadershipThe Key Ingredient

THREE MANAGEMENT PRINCIPLES

Lean Is the Strategy

Lead from the Top

Transform the People

WITHOUT THESEYOU WILL FAIL

LEAN IS THE STRATEGY

Focus On Process, Not Results

Better Value Adding = New Strategic Options

Lean Is a Time-Based Growth Strategy

IMPROVING YOUR VALUE ADDING ACTIVITIES IS

THE FOUNDATIONAL CORE OF YOUR STRATEGY

LEAD FROM THE TOP

People Are Resistant to Change

Lead by Example

Commit to Becoming a Lean Expert

Learn by Doing

THE LEADER IS THE KEY

TRANSFORM THE PEOPLE

The Only Asset That AppreciatesPeople

Respect Your PeopleBest Ideas

Create a Learning Environment

Invert the Organizational Pyramid

LEAN/CONTINUOUS IMPROVEMENT = CULTURE

LEAN FUNDAMENTALS

Work to Takt Time

One-Piece Flow

Standard Work

Pull System

THE BUILDING BLOCKS OF YOUR TURNAROUND

SOME UP FRONT WORK

Articulate Your Lean Vision

Obtain the Lean Knowledge

Kaizen Promotion Office

Lean Consultant

Add Some Lean Expertise to Your Board

WIREMOLD STRATEGY

Be the leading supplier in the industries served and one of the top ten time-based competitors globally

1) CONSTANTLY STRENGTHEN OUR BASE OPERATIONS

100% On-Time Customer Service

50% Reduction in DefectsPer Year

20% Productivity GainEach Year

20X Inventory Turns

Visual Control and the 5Ss

2) DOUBLE IN SIZE EVERY THREE TO FIVE YEARS

Pursue Selective Acquisitions

Use QFD to Introduce New Products Every Month

BOARD-DRIVEN KAIZEN RESULTS

AMERICAN SAFETY RAZOR

Item Result % Change Inventory Turns 2.5X to 6.2X + 148%

Working Cap./Sales 34% to 15% - 50%

Customer Service 85% to 98% + 15%

EBITDA Margin 17% to 23% + 35%

Cash Freed From W/C $65 Mil n.a.

Realized 3.5X Return On Investment

GETTING STARTED

You Cant Drop Lean on a Traditional Organizational Structure

Everything Has to Change

Create a Value-Stream Organization Up Front

Consider a Reduction in Force Before You Begin

EVERYONE MUST BE ON BOARD

FULL SPEED AHEAD

CEO Should Make the Announcement and Do the Initial Training

CEO Should Pick the Early Kaizen Events and Set the Stretch Goals

Kaizen Is Full-Time Job for the Week

Cut Set-Up Time

Free Up Space

Create Flow and Pull

INVENTORY IS THE ROOT OF ALL EVIL

TYPICAL RESULTSONE WEEK KAIZEN

Cut Lead Times 90%

Reduce Staffing From 10 to 5

Reduce Inventory by 70%

Reduce Floor Space by 50%

Reduce Defects by 60%

Reduce Travel Distance by 90%

Reduce Set-Up Time by 90%

Connect the Customer to the Shop FloorPull System

LEAN LEADERSHIP

Make the Case for ChangeUnfair Competitive Weapon

Get Everyone on Board or Let Them Go

Implement Policy Deployment

Establish Disciplined Daily Management at the Point of

Value-Adding

Take the Leaps of FaithOvercome the Lore

Push Through the Problems that Will Pop Up

Create Your Future Leaders

BE THE COMPANYS

LEAN ZEALOT

DUMP THE STUFF THAT WILL HOLD YOU BACK

Standard Cost Accounting System

Traditional Measurements

Tickets, Tickets, Tickets

Big End-of-Month Financial Reviews

Major Capital Appropriation Request Processes

LEAN APPLIES TO ANY BUSINESS

Lean Gains Are Bigger in Nonmanufacturing Companies But Harder to Get

Hospitals

Life Insurance

Distributors

VIRGINIA MASON MEDICAL CENTER

Nurses spend 90% of Time w/ Patients vs. 35% Average Hospital

Time to Report Lab Tests Down 85%

Cost of Supplies Cut $1 Million per Year

Hospital Liability Costs Down 48.9%

Accounts Receivable Days >90 Days: Down 74%

Spine Clinic: Space Down 78%; Headcount Down 29%; Margin Up 56%

Surgery Center: Case Time Down 39%; Turnover Time Down 50%; Cases Per Day Up 60%

Pharmacy: Order-to-Available Cut 93%

MARGIN DOLLARS

FROM: $0.7M in 2000

TO: $40.9M in 2010

SUMMARY

Byrne-san, If You Dont Try Something,

No Knowledge Will Visit You

Chihiro Nakao

LEAN PROVIDES UNFAIR

COMPETITIVE ADVANTGE

The Lean Turnaround by Art Byrne

Available at lean.org/bookstore

Learn from:

Art Byrne

John Shook

More Speakers, Learning Sessions,

and Companies to be Announced!

$350 Early Registration Discount, register today

Team Discount: Send 4 people and the 5th person is free!

Register at lean.org/Summit

in Orlando, FL

Q & A

Type your questions in the question box

Follow lean.org on Twitter

@LeanDotOrg

And Like us on Facebook