SBS Presentation Leading the Lean Enterprise Transformation · Thus lean leaders, including Toyota,...
Transcript of SBS Presentation Leading the Lean Enterprise Transformation · Thus lean leaders, including Toyota,...
regSimpler regSimpler
hellipBuilding Strategic Advantage through Enterprise Wide Improvementhellip
copy 1996-2008 Simpler Business Systemreg 110copy Simpler Consulting LP 1996-2008 ALL RIGHTS RESERVEDFor the Express Use of Simpler Members and Simpler Clients
SBS PresentationLeading the Lean Enterprise Transformation
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
MAJOR THEMES
EXPECTATIONS amp MEASUREMENTS
LEAN LEADERSHIP CHALLENGES
ORGANIZING FOR LEAN SUCCESS
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
What is LeanThe Two Pillars of Lean ndash ldquoTrue Northrdquo
CO
NTI
NU
OU
S IM
PRO
VEM
ENT
RES
PEC
T FO
R P
EOPL
E
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
What is Lean
Identification of Waste
Removal of Waste
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5
Operating Room Waste
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6
Operating Room ndash Improved Flow
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What is Lean
Current State
Improved State
Solve Problems
ExposeProblems
ldquoOur own attitude is that we are chartered with discovering the best way of doing everything and that we must regard every process employed in the business as purely experimentalrdquo Henry Ford
ldquoTrue NorthrdquoValue Added Time = Lead Time
At Local LevelWith ldquoGuidancerdquo
ldquoImprovement with Guidancerdquo
ldquoIf you assume that things are all right the way they are you canrsquot do Kaizenrdquo Tiichi Ohno
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
8
Toyota WayT
QC
TP
S
Human DevelopmentbullEverything in TQC begins with awareness of the customerbullOur ultimate goal in TQC is to earn customer satisfactionbullWe at Toyota come to TQC with the frank admission that we had problems with qualitybullTQC helped Toyota become a pioneering winner of the Deming Prize in 1961
Masao Nemoto Senior Managing Deputy Toyota Motors
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson One
Value Stream Analysis Provides the Improvement
Plan
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Value Stream Map
Area Home IV Infusion
Current State
Business CaseIncrease production efficiency
Decrease delays for patient
Capitol Cost Avoidance
Value StatementProvide safe effective and accurate meds and information to the patient at lowest cost
Key RequirementsRPH
Technician Involvement
USP Compliant
Order from Doctor
MeasurementsCost Avoidance Rent Reduction
Reduced Inventory $
Reduced Patient Flowtime
Increased Quality for Patient
IDEAL STATEON DEMAND
DEFECT FREE1 BY 1
LOWEST COST
Go to the Gemba
Walk the Gembutsu
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Value Stream Maps
Area Home IV InfusionIdeal State
BUSINESS CASEIncrease production efficiency Decrease delays for patient Capital Cost Avoidance
VALUE STATEMENTProvide safe effective and accurate meds and information to the patient at lowest cost
KEY REQUIREMENTSRPH Technician Involvement USP CompliantOrder from Doctor
MEASUREMENTCost Avoidance Rent Reduction
Reduced Inventory $ Reduced Patient Flowtime
Increased Quality for Patient
IDEAL STATEON DEMAND DEFECT FREE 1 BY 1 LOWEST COST
Focus = Just the Value Added
Learning = Begin to ldquoSee Wasterdquo
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Value Stream Map
Area Home IV Infusion Future StateBUSINESS CASE
Increase production efficiency
Decrease delays for patient
Capital Cost Avoidance
VALUE STATEMENTProvide safe effective and accurate meds and information to the patient at lowest cost
Key RequirementsRPHTechnician InvolvementUSP CompliantOrder from Doctor
MEASUREMENTSCost Avoidance Rent Reduction
Reduced Inventory $Reduced Patient Flowtime
Increased Quality for Patient
IDEAL STATEON DEMANDDEFECT FREE1 BY 1LOWEST COST
The 6-18 month improvement plan
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Two
Think 5X
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OLD PROCESS
Typical Process = 23 VA
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
NEW PROCESS
Typical First ldquoPassrdquo = Drop frac12 - StepsHandoffsErrorsTimeWaste
Typical 4th5th ldquoPassrdquo = Drop 90- StepsHandoffsErrorsTimeWaste
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Three
It is AlwaysMore Than
You Think
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
World Class Benchmarking
ldquoBatchrdquoSystem
ldquoToyotardquoSystem (Lean)
Inventory Turnover 3x 30x Cash Generation
Customer Complaint Rate 10000ppm 100ppm Turns
Company Into
CustomerLead Time
- 95A Growth Company
Space -90
Productivity 1x 4x Margin Improvementldquo2rdquo ptsyr for 6 yrs
MOST DONrsquoT REALIZE HOW HIGH ldquoHIGHrdquo REALLY IS
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Lesson Four
MeasurementCan beSimple
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Measuring Lean
Toyota Production System Vision of the Ideal ndash True North
Customer Satisfaction = Quality - 0 Defects Delivery ndash Lead Time = Value Added Time Cost ndash 100 Value Added Work
Improvement in Q D amp C drives ALL financial performance measures
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Measuring LeanLean is a PEOPLE DRIVEN PROCESS
Thus lean leaders including Toyota add ldquoHuman Developmentrdquo to the TOP of their targeted measurements list
The priority ranking for improvement is HDQD amp CP But lean enterprises expect world class annual improvement
rates (ldquoDouble Digitsrdquo) in all four categories
ldquoThere can be no successful Monozukuri (making things) without Hito-Zukuri (making people)rdquo
Toyota
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Lesson Five
Quality Pays
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38
29
2027
2013
2114
705
10152025303540
High 60 25 Low
Inferior33-67
Superior
ROI
Relative Market Share
Relative Quality
(percentile)
Higher Relative Quality = Higher ROI ndash At Any Market Share LevelPIMS Principles R Buzzell amp B Gale
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
US Customer Behavior Study
Customers who have been disappointed by defects malfuntions and other basic quality problems 90 go away without saying anything and DO NOT RETURN
85 of those people tell AT LEAST 9 other people of their dissatisfaction 15 voice their dissatisfaction to AT LEAST 20 other people
Every REPORTED quality problem should be treated as a ldquogolden nuggetrdquo ndash the beginning of the next
improvementSource TARP ndash Technical Assistance Research Program
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Six
Short Consistent
Lead Times
Provide Growth
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lean Conversion Impact
0
02
04
06
08
1
12
14
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A1988 1989 1990
ldquoMonthly Shipmentrdquo Months Past Due
ldquoDaily Shipmentsrdquo
Delivery Performance
Moved from delivery once a month to daily in 2 frac12 yrsMoved from 0 on time to 100 on time
95 Reduction in Throughput TimeLead Time
5 ldquopasses through the Value Streamrdquo
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Reducing Lead Times by frac34=Growing 2-4 Times Industry Rate
Company Business Lead TimeDifference
Growth Average
Atlas Door Industrial Doors
66 5x
Ralph Wilson Plastics
Decorative Laminates
75 4x
Thomasville Furniture 70 2x
Lean can reduce lead time of all customer sensitive processes ndash EG Product Development Application Engineering Order Entry Corrective Action
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Seven
The Fastest Way to Increase Capacity is hellip
Lean Transformation
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lean Conversion Impact
0
53
64
76
0
01
02
03
04
05
06
07
08
1987 1988 1989 1990
Jacobs Space Recovered
of total square footage
frac12 of floor space freed up in 1 yrfrac34 of floor space freed up in 3 yrs
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Eight
Productivity
Drives 90 of
Internal Costs
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Lesson Nine
A Four Fold
Productivity Gain
IS
Possible
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lean Conversion ImpactJacobs Productivity Trend
Kits Packed100 hours
1989 Plan 1989 Actual
+86productivity
GK to Pres Tool Group
Few firms measure productivity ndash
Even fewer push double digit improvement rates
ldquoWe set really high targets and then try like crazy to get there If we donrsquot reach a target we try to figure out why we fell short What stopped us Is there anything we can do to take another steprdquo
David Absher TMMNA
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
JACOBS PRODUCTIVITY TRENDKits Packed100 Hours Worked
+271Productivity(after 5 yearsof conversion
Work)
Lean Conversion Impact
Note Implementation stopped 990 Restarted 192
Lean Event Activity Drives Results
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Ten
As a Leader
It will take 70 of your timefocus to get double digit gains in productivity
But 30 of your timefocus will get double digit gains in people development quality and delivery cycle times
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Twelve
PEOPLE ARE THE FOUNDATION OF
ALL IMPROVEMENT
ldquoWE BUILD PEOPLE
BEFORE WE BUILD CARSrdquoTOYOTA
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Toyota Style HabitsBehaviors
bull Be a mentor and a role modelndash People development is 1 True North goal
ldquowe build people before we build carsrdquobull The key to people development is mentoring
ndash Thus mentoring is the 1 skill of Toyota leadersraquo You demonstrate mentoring skill through the
development amp performance of those who work for you problem solving
raquo You CANNOT be promoted until you have demonstrated your desire and ability to mentor
ldquoGood leaders do not produce more followers Good leaders produce more good leadersrdquo Takashi Harada Toyota OMCD
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Jake Brake-1987 to 1998
ndash Sales 380 of 1987ndash Productivity 470 of 1987
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
39
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Sixteen
Lean Improves
Both the
Income Statement
And the
Balance Sheet
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lean has positive impacts on both the Income Statement and Balance Sheet
bull Income Statementndash Total Sales
bull Grows at 2-4X industry growth rate due to short DELIVERY TIMEbull Grows due to improved QUALITYbull Grows due to faster lower cost NEW PRODUCT DEVELOPMENT
ndash Cost of Salesbull Is reduced due to productivity growth
ndash Selling General amp Administrative Costsbull Is reduced due to productivity growth
ndash Financing Costsbull Reduced as inventory goes downbull Debt paid down with increased income
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
bull Balance Sheetndash Inventory
bull Reduced dollar value of inventoryndash Sales growth requires less working capital
ndash Fixed Assetsbull Frees up both floor space and machine capacity
ndash Sales growth requires less fixed capital
bull Net net = A Synergistic Impact on ROA amp ROE
PDQDC DRIVE ALL FINANCIAL METRICS
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Manufactured Fireplace Firm ndash 7 years of lean
bull Recordable accident rate -81bull Warranty costs -69bull Lead time 6 weeks 5 days
ndash Mixed truck load build to dealer orderbull Complete and on time 84 98bull Enterprise productivity +38bull Inventory turnover +171bull Salessquare foot +131bull Operating income percent +221bull Return on assets +237bull Cash flow +519
HDQD amp C Drive all Financial Metrics
bullTrue North improvements are all ldquodouble digitrdquo gainsbullFinancial improvements show TN synergy with ldquotriple digitrdquo gains
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Seventeen
Lean
ldquoFeels Wrongrdquo
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
ldquoIt Just Doesnrsquot Feel Rightrdquo
bull The principles of lean can easily be absorbed in a one-half day classroom session BUT
bull The intellectually easy to grasp principles such as ldquoone-piece flowrdquo GO AGAINST THE TRAINING AND PRACTICES OF OUR WHOLE PRIOR CAREERS
ldquounderstanding theory in the head is NOT the problem The problem is to remember it in the body to make it instinctive
Taiichi Ohno ldquoThe Evolution of the Toyota Production Systemrdquo
Unpublished manuscript
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
It Just Doesnrsquot Feel Right
The Core Concepts of Lean are not Complex Ideas but they are Difficult to apply because they are the OPPOSITE of what we currently believe
From we need to ldquofire fightrdquo todayrsquos problems quickly Tohellipwe need to ask ldquowhyrdquo five times
From seeing people as the source of problems Tohellipseeing processes as the source of problems
From ldquoA supervisorrsquos ldquonatural urgerdquo to redeploy the lowest performer from a work team whose area has been Kaizenedrdquo Tohelliprdquoalways redeploying the best team membersrdquo
From ldquoYou go to class to learnrdquo TohellipManagement teaches by example ndash guiding associates through developmental experiences
ndash learn by doing
From ldquoWhat matters is how good we arerdquo TohelliprdquoWhat matters is how fast we are improvingrdquo
Itrsquos not hard to understandhellipItrsquos hard to do
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Eighteen
Lean knowledge
is acquired through
long term
HANDS ON LEARNING
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
The Learning Curvebull You can only really learn lean production by OJT (the ldquodirty handsrdquo method)bull If you spend a full week on a Kaizen event improving a small area of your
operation it will take a dozen weeks of the OJT to give ldquoBASIC TRAININGrdquo in lean production (at a Kaizen eventmonth pace this takes one year)- GRADE SCHOOL
bull If you continue to gain personal experience in full-time week-long ldquodosesrdquo it will take about 36 weeks of OJT before you are COMPETENT with most of the lean ldquotoolsrdquo- HIGH SCHOOL
bull However it will take about 60 weeks or more of OJT (about 5 years) for you to be fully competent with the ldquotoolsrdquo and also fully BELIEVE in the principles-COLLEGE
bull ldquoInstitutionalizingrdquo the behaviors that are the foundation for a new continuous improvement culture takes more like 100 events + a decade of lean transformation leadership experience - GRADUATE SCHOOL
EVERYONE underestimates the length of the learning curve
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Toyota has long maintained that the Toyota Way can only be grasped through constant
practice in the workplace under the tutelage of a deeply
experienced MasterFortune February 7 2005
ldquoSome lessons canrsquot be taught They must be lived to be learnedrdquo
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved
Lesson Nineteen
Lean Participation
Creates New
Attitudes and Behaviors
Simpler Business Systemreg 110 copy1996-2010 Simpler Consulting LP All Rights Reserved