Lean Transformation in Office, Service, and Knowledge Work Enviroments
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Company
LOGO
Lean Transformation in Office,
Service, and Knowledge Work
Environments
July 13, 2010
© 2010 Karen Martin & Associates
Your Instructor
Early career as a scientist; migrated to
quality & operations design in the mid-80’s.
Launched Karen Martin & Associates in
1993; applied Total Quality Management.
Introduced to Lean in 2000.
Specialize in Lean transformations in non-
manufacturing environments.
Co-author of The Kaizen Event Planner;
co-developer of Metrics-Based Process
Mapping: An Excel-Based Solution.
Instructor in University of California, San
Diego’s Lean Enterprise program.
2
Karen Martin,
Principal
Karen Martin &
Associates
© 2010 Karen Martin & Associates
Learning Objectives
Participants will learn:
Organizational benefits of Lean and timeframes for
achieving them.
Lean as an overall business management philosophy
vs. “Lean Lite” for process improvement.
Core Lean principles and tools.
How Lean shifts culture.
Key success factors in the transformation process.
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© 2010 Karen Martin & Associates
What Lean Is….
A proven business management approach that
results in fiscal strength, customer and
employee loyalty, and organizational agility.
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© 2010 Karen Martin & Associates 5
Typical Benefits Realized
5
Lead Time Reduction
0% 25% 50% 75% 100%
Productivity Increase
WIP Reduction
Quality Improvement
Space Utilization
WIP = Work in process
© 2010 Karen Martin & Associates 6
Lean Financial Benefits
5 Year Net Income - Toyota vs. GM Toyota: + $48.7 billion
GM: – $ 81.3 billion
DJO – medical brace manufacturer Increased inventory turns from 7 to 22 in 4 years
$7 million cash conversion
Grew market share from 20% to 40% in 3 years
Tripled revenues with doubled costs in 4-year period
Bank of America – $2 billion in benefits* directly tied to Lean Six Sigma efforts over 3 years. * Includes cost avoidance
© 2010 Karen Martin & Associates 7
Lean Financial Benefits (continued)
Park Nicollet Healthcare – Saved $7.5 million in expenses, which they reinvested in patient care.
Global investment management firm – $3M labor expense reduction over 18 month period Attritted workforce/freed capacity
Medical Device Manufacturer Pre-lean – 3.00 per share
Purchased – $78 per share (12 yrs later)
© 2010 Karen Martin & Associates
The Lean Enterprise
Based on the Toyota Production
System
Spawned by weaving process
Modeled after U.S. grocery stores
Popularized by Jim Womack in Lean
Thinking (1996)
Key tenets
Minimum effort and expense necessary
to achieve maximum results.
Reduce waste to create flow.
Primary metric - time
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© 2010 Karen Martin & Associates
Performance Measures
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Quality
Cost
Delivery Safety
Morale Optimal
Performance
© 2010 Karen Martin & Associates
The Toyota Way – Key Principles
Think long term
Have respect for people
Standardize work
Error-proof work
Make problems visible
Fix problems immediately
Develop exceptional people
Gain consensus
Go and see (gemba)
Continuously improve (kaizen)
50% effort working in the business; 50% on the business
Reflect relentlessly (hansei)
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© 2010 Karen Martin & Associates
Problem-Solving Steps
1. Identify the problem
2. Explore the problem What’s the true root cause?
3. Consider potential solutions Hypothesize
4. Test solutions Confirm hypothesis
5. Implement solution(s)
6. Measure results Did the hypothesis prove out?
7. Adjust as needed
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Plan
Do
Check
Act
{ 50-80%
of the
total
time
© 2010 Karen Martin & Associates
Most People…
Underestimate the power of Lean.
Underestimate what it takes to “become”
Lean.
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© 2010 Karen Martin & Associates
Transforming Takes Time
Lean is a
long-term
business
strategy.
13
Journey to a Lean Enterprise
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Heavy support from
seasoned improvement
professionals
Light support from
seasoned improvement
professionals
Support needed only for
audits, bandwidth gaps,
continued learning
Years 1 & 2 Small percentage of staff
engaged – project-based
Years 3 & 4 Greater staff engagement –
reduced need for formal
Kaizen Events
Years 5 & Beyond Company-wide engagement –
everywhere, all the time
“Settling In” Stage
• Demonstrating learned
competencies
• Process owners manage
performance
• Becoming more proactive
“Life is Good” Stage
• Daily kaizen is the norm
• “Action now” dominates
• Most processes are
stabilized with minimal waste
and output variation
“Disruption” Stage
• Sensei-dominated
• Much mentoring & learning
• Heavy use of Kaizen Events
• Many issues to be resolved
© 2010 Karen Martin & Associates
Competencies That Must Be
Developed
Lean Leadership
Problem-solving
Setting clear strategies
Developing and entrusting the frontlines with tactics
Modeling Lean behaviors
Improvement Professionals
Problem-solving
Technical skills – Lean tools
Change management / psychology
Workforce
Problem-solving
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© 2010 Karen Martin & Associates
Where to Begin?
Systematic Approach
Define product families
Select one for improvement
Create Value Stream Maps
Begin implementing improvement
The “Fire” Approach
Select a problem to be solved
Tied to business goals
Use A3 Problem-Solving to solve it
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Building a Lean Enterprise
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Customer-Defined Value
Value-Adding (VA) - any operation or activity your external customers value and are (or would be) willing to pay for.
Non-Value-Adding (NVA) - any operation or activity that consumes time and/or resources but does not add value to the product (good or service) the customer receives.
Necessary – support processes, regulatory requirements, etc.
Unnecessary – everything else - WASTE
Unnecessary Non-valueadding
Necessary Non-value-adding
Value-adding
Work Effort as Defined by the
External Customer
© 2010 Karen Martin & Associates
Eight Wastes (Muda)
Overproduction
Inventory
Waiting
Over-Processing
Errors
Motion (people)
Transportation (material/data)
Underutilized
people
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© 2010 Karen Martin & Associates
Value Stream Defined
Value Stream: All of the activities, required to fulfill a customer request from order to delivery (and beyond to cash received).
Customer
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Value Stream
Process Process Process
Customer
Request
Customer
Receipt
© 2010 Karen Martin & Associates
Why Value Stream Mapping?
To set strategy before diving into tactics.
Enables us to SEE the process.
Promotes systems thinking / seeing the whole
Helps us avoid sub-optimizing
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© 2010 Karen Martin & Associates
VSM Goal: System Efficiency
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Traditional Improvement
Creates Point Efficiency
(Sub-optimization)
Value Stream
Management Creates
System Efficiency
Current State Value Stream Map
Outpatient Imaging Services
Demand = 15 CTs per day
Customer Demand:
15 patients per Day
(Takt Time 1920 seconds)
8 hours per day
Referring
Physician
% C&A = 65 %
Check-in
Patient
(Admitting)
Cycle Time = 2 mins.
% C&A = 90 %
5
Send
Reports
(Imaging)
Cycle Time = 3 mins.
% C&A = 90 %
6
Hospital
5 mins.
Schedule
Appointment
Cycle Time = 11 mins.
Lead Time = 12 mins.
% C&A = 98 %
6
Pre-register
Patient
Cycle Time = 30 mins.
Lead Time = 990 mins.
% C&A = 100 %
5
CT=Cycle Time
LT=Lead Time
%C&A=% Complete & Accurate
0.0833 hrs.
2 mins.
0.0833 hrs.
1 mins.
0.75 hrs.
10 mins.
0.5 hrs.
15 mins.
0.0833 hrs.
3 mins.
4.13 hrs.
15 mins.
6.08 hrs.
5 mins.
16 hrs.
1 mins.
1.83 hrs.
1 mins.
2 hrs.
3 mins.
LT = 32.5 hrs.
CT = 56 mins.
CT/LT Ratio = 2.87%
Lead Time = 12 mins.Lead Time = 990 mins.
Prep
Patient
(Tech)
Cycle Time = 10 mins.
% C&A = 100 %
2
Check-in
Patient
(Imaging)
Cycle Time = 1 mins.
% C&A = 98 %
3
Complete
Exam
(Tech)
Cycle Time = 15 mins.
% C&A = 90 %
2
Transmit
Images
(Tech)
Cycle Time = 3 mins.
% C&A = 100 %
2
Read/Dictate
Exam
(Radiologist)
Cycle Time = 15 mins.
% C&A = 95 %
2
Transcribe
Report
(MDI)
Cycle Time = 5 mins.
% C&A = 75 %
6
Review
Draft/Sign
(Radiologist)
Cycle Time = 1 mins.
% C&A = 95 %
2
Reports
(Imaging)
Cycle Time = 1 mins.
% C&A = 99 %
230 mins. 5 mins. 248 mins. 365 mins. 960 mins. 110 mins. 120 mins.45 mins.
E Pay
Excel
ADS
Symposium
Internet
Waiting Room
Management
System
Fax Order
Solutions
PACS
5 mins.
Lead Time = 24 days
Meditech
123
4
5 6 7 8 9 10 11 12 13 14
Auto Fax 50%
Us Mail 25%
MD Mailbox 25%
Rework Loop via Fax 25% of the time
Rolled First Pass
yield = 29%
© 2010 Karen Martin & Associates
Key Metrics: Time
Process time (PT)
The time it takes to actually perform the work, if one is
able to work on it uninterrupted
Includes task-specific doing, talking, and thinking
aka “touch time,” work time, cycle time
Lead time (LT)
The elapsed time from the time work is made available
until it’s completed and passed on to the next person or
department in the chain
aka throughput time, turnaround time, elapsed time
Includes Process Time, not merely waiting time.
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© 2010 Karen Martin & Associates
Lead Time vs. Process Time
26
Lead Time
Work
Received
Work passed
to next step
Process Time
LT = PT + Waiting / Delays
Activity Ratio = (LT ÷ PT) x 100
© 2010 Karen Martin & Associates
Key Metrics: Quality
%Complete and Accurate (%C&A)
The percentage of input that’s deemed “usable as is”
by the person doing the work
% of incoming work where the downstream customer
can perform task without having to “CAC”:
Correct information or material that was supplied
Add information that should have been supplied
Clarify information that should have or could have been
clearer
Measured by the immediate downstream customer
and all subsequent downstream customers.
Similar to first pass yield in manufacturing.
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© 2010 Karen Martin & Associates
Summary Metrics: Quality
Rolled First Pass Yield (RFPY)
The percent of value stream output that passes
through the process “clean,” with no “hiccups,”
no rework required.
RFPY = %C&A x %C&A x %C&A…
Common finding = 0-15%
Multiply ALL %C&A’s, even if parallel processes
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© 2010 Karen Martin & Associates
Outpatient Imaging
Projected Results
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Metric
Current
State
Projected
Future State
%
Improvement
Lead Time 32.5 hrs
Process Time 56 mins
Percent Activity 2.9%
Rolled First Pass Yield 29%
Labor requirements 1.9 FTEs
# Handoffs 14
Tech Turnover 100% (6 mos)
Future State Value Stream Map
Outpatient Imaging Services Demand = 15 CTs per day
Referring
Physician
% C&A = 85 %
Send
Reports
(Imaging)
Cycle Time = 3 mins.
% C&A = 90 %
6
Hospital
Schedule appt
Pre-register
Cycle Time = 11 mins.
Lead Time = 45 mins.
% C&A = 98 %
6
CT=Cycle Time
LT=Lead Time
%C&A=% Complete & Accurate
0.0833 hrs.
1 mins.
0.583 hrs.
10 mins.
0.333 hrs.
10 mins.
0.0833 hrs.
2 mins.
2 hrs.
15 mins.
7 hrs.
1 mins.
0.0333 hrs.
1 mins.
0.5 hrs.
3 mins.
LT = 11.3 hrs.
CT = 43 mins.
CT/LT Ratio = 6.32%
Lead Time = 45 mins.Lead Time = 15 days
Prep
Patient
(Tech)
Cycle Time = 10 mins.
% C&A = 100 %
2
Check-in
Patient
(Imaging)
Cycle Time = 1 mins.
% C&A = 98 %
3
Complete
Exam
(Tech)
Cycle Time = 10 mins.
% C&A = 90 %
2
Transmit
Images
(Tech)
Cycle Time = 2 mins.
% C&A = 100 %
2
Read/Dictate
Exam
(Radiologist)
Cycle Time = 15 mins.
% C&A = 95 %
2
Review
Draft/Sign
(Radiologist)
Cycle Time = 1 mins.
% C&A = 95 %
2
Reports
(Imaging)
Cycle Time = 1 mins.
% C&A = 99 %
220 mins. 5 mins. 120 mins. 420 mins. 2 mins. 30 mins.35 mins.
E Pay
Excel
Symposium
Internet
Waiting Room
Management
System
Fax Order
Solutions
PACS
5 mins.
Set-upReduction
Remove Check in
and ReduceSystem Access
Work Balancing
StandardWork
Pull System(Supplies Kanban)
VisualWorkplace
Voice Recognition
Batch Reductions
5S
Co-locate
StandardWork
Work Balance
ContinuousFlow
Value StreamAlignment
Auto Fax 80%
Us Mail 15%
MD Mailbox 5%
Rolled First Pass
yield = 40%
Rework Loop via Fax 10% of the time
Customer Demand:
15 patients per Day
(Takt Time 1920 seconds)
8 hours per day
12
3
45 6 7 8 9 10 11
Risk Reduction
(Joint Commision)
Meditech
© 2010 Karen Martin & Associates
Outpatient Imaging
Projected Results
31
Metric
Current
State
Projected
Future State
%
Improvement
Lead Time 32.5 hrs 11.3 hrs 65%
Process Time 56 mins 43 mins 23%
Percent Activity 2.9% 6.3% 117%
Rolled First Pass Yield 29% 40% 38%
* Labor requirements 1.9 FTEs 1.6 FTEs 16%
# Handoffs 14 11 21%
Tech Turnover (6 mos) 100% 25% 75%
* Created the capacity to generate $500,000 in additional annual revenue with no
increase in labor or equipment expense.
Value Stream
1 2 3 4 5 6 7 8 9 10 11 12
2 Improve quality of referral KE Sean O'Ryan
3, 4Reduce lead time beween schedulingand
preregistration stepsPROJ
Dianne
Prichard
5, 6Eliminate the need for two patient check-
insKE
Michael
O'Shea
6 Eliminate bottleneck in waiting area KEDianne
Prichard
9Eliminate lead time associated with
transcription stepPROJ Sam Parks
10 Eliminate batched reading KE Sam Parks
7Reduce inventory costs, regulatory risk
and storage needsKE
Michael
O'Shea
12 Reduce delay in report delivery PROJ Martha Allen
12 Reduce delay in report delivery KE Martha Allen
Implement voice recognition technology
Reduce setup required
Cross-train and colocate work teams
Implement additional fax ports
Collect copays in Imaging
Balance work / level demand
5S CT supplies area; implement kanban
Value Stream Mapping Facilitator
Increase percentage of physicians
receiving electronic delivery (rather than
hard copy)
Approvals
Executive Sponsor Value Stream Champion
Signature:
Date: Date: Date:
Signature: Signature:
Block
#Goal / Objective Improvement Activity
Implement standard work for referral
process
Type OwnerImplementation Schedule (weeks) Date
Complete
Date Created
11/21/2007
Allen Ward
Sally McKinsey
Dave Parks 12/13/2007
10/18/2007 1/10/2008
Future State Implementation Plan
Executive Sponsor
Value Stream Champion
Value Stream Mapping Facilitator
Implementation Plan Review Dates
11/1/2007
Outpatient Imaging
Building a Lean Enterprise
© 2010 Karen Martin & Associates 34
Kaizen Defined
KAIZEN
Kai Zen
Break apart
To change
Study
Make better
Kaizen = Continuous Improvement
Kaizen Event = Rapid Improvement
© 2010 Karen Martin & Associates 35
Who? Accountability Tool
Leadership “What has to happen” Value Stream
Mapping
Workforce “How it will happen” Kaizen Events,
Just-do-its,
and Projects
Improvement Roles S
tra
teg
ic
Tac
tic
al
Middle
Management
© 2010 Karen Martin & Associates 36
Kaizen Event – Definition
A two- to five-day focused improvement
activity during which a sequestered,
cross-functional team designs and fully
implements improvements to a defined
process or work area, generating rapid
results and learned behavior.
Karen Martin & Mike Osterling
The Kaizen Event Planner, 2007
© 2010 Karen Martin & Associates 37
When do you need a Kaizen Event?
Rapid change is desired.
Hands-on learning is desired.
You want to “bake” the improvement
process into the organizational DNA
You want to shift culture by engaging the
frontlines in problem solving.
Leadership stays out of tactical details.
© 2010 Karen Martin & Associates 38
5-Day Kaizen: Sample Structure
Day 1 & 2
(Plan)
Day 3 & 4
(Do, Check)
Day 5
(Check, Act)
Kick-off (executive presence)
Analyze current state
Perform root cause analysis
Design future state
Interim briefing
Design & test improvements
Obtain buy-in
Interim briefing
Finalize improvements
Train process workers & stakeholders
Present results
CELEBRATE!
Building a Lean Enterprise
Process
Stabilization
Tools
Building a Lean Enterprise
Flow Enabling
Tools
© 2010 Karen Martin & Associates
Kaizen Event Results
Reduced medication delivery interruptions by 75%.
Secured an exclusive 2-year contract with key
customer.
Freed 1.4 FTEs in streamlined discharge process.
Reduced scrap by $6,876 per year.
Produced twice as much “road mix” at half the
cost.
Reduced lead time for purchasing process from 10
to 2.5 days.
41
A3 Problem-Solving
42
Lean Transformation vs. “Lean Lite”
43
Lean Transformation “Lean Lite”
Full leadership engagement &
development 1 or 2 leaders leading the way
Improvement heavily strategic;
closely tied to business goals “Random acts of kaizen”
Full adoption of the Lean philosophy Selective use of the tools
Dedicated internal resources Shared resources
Significant investment in skill
development Expected to “figure it out”
Heavy use of external support for
first 1-2 years Internal resources only
Holistic approach to improvement Silo’d thinking & behaving
Frontlines heavily engaged in the
improvement process
Improvement resources or
leadership drive improvement
© 2010 Karen Martin & Associates 44
The Transformation Process:
Key Success Factors
Strong sense of urgency / burning platform
Leadership alignment around strategy
Improvement priorities are closely tied to organizational strategy
and annual business goals.
Value-stream driven improvements.
To avoid change fatigue, improve one value stream at a time.
Heavy use of Kaizen Events in first 1-3 yrs.
4 Events per 100 employees per year
Dedicated improvement resources.
1 FTE: 100 employees
Entire workforce receives exposure to Lean and becomes
skilled in problem-solving.
Concurrent leadership development.
© 2010 Karen Martin & Associates
Lean Benefits - Financial
Reduced expenses
Reduced requirements for equipment and supplies
Reduced space requirements
Reduced head count for existing work
Improved cash flow
Faster billing and collections
Increased revenue
Recaptured lost revenue
New revenue sources
Greater market share – customers want the highest
quality products, delivered the fastest, at lowest cost.
45
© 2010 Karen Martin & Associates
Lean Benefits - People
Improved productivity
Reduced sick time, workers’ comp,
etc.
Better safety
Less stress / frustration
Reduced interpersonal and
interdepartmental tension
Greater engagement / higher
satisfaction
Improved ability to attract and
retain talent
Greater innovation
46
© 2010 Karen Martin & Associates
Lean Benefits – Risk Mitigation
Improved compliance
(regulatory / accreditation)
Reduced litigation
Reduced risk of unionization
or strikes
Improved safety – customers,
employees, and community
47
© 2010 Karen Martin & Associates
Lean Benefits – Happier Customers
48
© 2010 Karen Martin & Associates
Learning Objectives
Participants will learn:
Organizational benefits of Lean and timeframes for
achieving them.
Lean as an overall business management philosophy
vs. “Lean Lite” for process improvement.
Core Lean principles and tools.
How Lean shifts culture.
Key success factors in the transformation process.
49
Upcoming Webinars
50
Topic Date
Kanban Pull Systems Tuesday, July 20
Work Standardization & Metrics-
Based Process Mapping
Tuesday, August 10
Error-Proofing Thursday, August 12
Kaizen Events – Part I Tuesday, August 31
Kaizen Events – Part II Thursday, September 2
A3 Problem-Solving – Part I Tuesday, September 28
A3 Problem-Solving – Part II Thursday, September 30
Register at www.ksmartin.com/webinars
© 2010 Karen Martin & Associates 51
Karen Martin, Principal
7770 Regents Road #635
San Diego, CA 92122
858.677.6799
For Further Questions
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