SO, what does lean mean to you?
A lot of people think it means doing more with less people.
Well, sometimes that’s the case, according to Mark Martincic, a professional advisor for KEA Advisors. But not very often.
In his presentation, “Lean, Mean, Dealership Machine,” Martincic explained that the core idea of lean is to maximize “customer value” while “minimizing waste.”
“Simply, lean means creating more value for customers with fewer resources,” he said. “It’s about increasing throughput but with a flow, with a pull system. Pulling it through instead of all of the workarounds that happens at most dealerships.
“You have a process. You may have a flow chart. If you do A, then B, then C. But if the process breaks down between B and C, you have all the busywork that happens that no one’s getting paid to do. We throw people in the process problem historically: ‘We need more people, boss. We can’t get this done.’ That’s because the process is constantly breaking down.”
Lean is a set of principles and behaviors that underlie the Toyota Motor Corporation’s managerial approach and production system. Toyota first summed up its philosophy, values, and manufacturing ideals in 2001, calling it “The Toyota Way 2001.” It consists of principles in two key areas: continuous improvement, and respect for people.
The principles for a continuous improvement include establishing a long-term vision, working on challenges, continual innovation, and going to the source of the issue or problem. The principles relating to respect for people include ways of building respect and teamwork.
Long-term philosophy:
• Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.
The right process will produce the right results:
• Create continuous process flow to bring problems to the surface.
• Use the “pull” system to avoid overproduction.
• Level out the workload (heijunka).
• Build a culture of stopping to fix problems, to get quality right the first time.
• Standardized tasks are the foundation for continuous improvement and employee empowerment.
• Use visual controls so no problems are hidden.
• Use only reliable, thoroughly tested technology that serves your people and processes.
Add value to the organization by developing your people and partners:
• Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.
• Develop exceptional people and teams who follow your company’s philosophy.
• Respect your extended network of partners and suppliers by challenging them and helping them improve.
Continuously solving root problems drives organizational learning:
• Go, see for yourself, to thoroughly understand the situation (genchi genbutsu).
• Make decisions slowly by consensus, thoroughly consider all options; implement decisions rapidly.
• Become a learning organization through relentless reflection (Hansei) and continuous improvement (Kaizen).
“What do we need you to do?” he asked. “Commit to implementing a lean production system. Assign key project champions, team leaders, team members, and trainers as required. Create and deploy a lean-based vision for the future of your operations. Enroll the entire organization in the effort. Set up and conduct periodic Steering Committee meetings to ensure appropriate leadership of the effort. Measure and track overall progress.”
He listed the Seven Wastes of Taiichi Ohno, a Japanese industrial engineer and businessman who is considered to be the father of the Toyota Production System:
• Overproduction. Manufacture of products in advance or in excess of demand wastes money, time, and space.
• Waiting. Processes are ineffective and time is wasted when one process waits to begin while another finishes. Instead, the flow of operations should be smooth and continuous. According to some estimates, as much as 99% of a product’s time in manufacture is actually spent waiting.
• Transportation. Moving a product between manufacturing processes adds no value, is expensive, and can cause damage or product deterioration.
• Inappropriate processing. Overly elaborate and expensive equipment is wasteful if simpler machinery would work as well.
• Excessive inventory. Resources are wasted through costs of storage and maintenance.
• Unnecessary motion. Resources are wasted when workers have to bend, reach or walk distances to do their jobs. Workplace ergonomics assessment should be conducted to design a more efficient environment.
• Defects. Inspecting and quarantining inventory takes time and costs money.
He discussed process improvement calculations and tools and the hierarchy of process discovery, saying that this is the evolution of detail of analysis:
• SIPOC. A diagram that provides high-level scoping of the process. Start with this diagram to determine the process scope and stakeholders. Reference and update throughout the process maturity states.
• Swim lane process diagrams. Create a flow chart of activities that includes roles. Use during process discovery to understand how things currently operate. It provides the foundation for the future state.
• Value stream mapping. A technique of diagramming the flow of information and materials representing a process to provide a product or service to identify product, process, and information flows with value-add percentage. Use to visually illustrate waste and apply costs to the process. Start with this diagram to determine flow. Reference and update throughout the process maturity states.
• Process mapping. The activity of representing processes so that the current process may be analyzed and improved
Develop a process map to capture the current state. Reference throughout the process maturity states.
He said there are many tools and measurements you may use to analyze process performance and identify issues. This is a selected list of tools and calculations you are likely to use:
• 5S. A method for organizing the workplace that includes: Sort (get rid of anything unnecessary); Set-in-Order (make important items visible and self-explanatory); Shine (clean the work space and equipment); Standardize (establish guidelines for sorting, ordering, and shining); Sustain (adhere to these rules, and develop an audit system or rating system if needed).
“This is one of the first steps of continuous improvement,” he said. “It is useful from initial process improvement throughout the life of a process.”
• 5 Whys. Ask why until you get to the root cause. Five iterations of questioning usually achieve identification of the root cause. This could be conducted by one person who is knowledgeable about the process or among a team. Use during the early stages of process maturity.
• Analysis of Variance (ANOVA). A statistical test to determine if the means of several groups are equal. Use to analyze variability.
• Available Time. The amount of time an organization is open for business and able to process the work. Remove time dedicated to other processes and break time. Collect during process discovery. This is a common value stream metric.
• Batch Size. This refers to employees completing tasks for several components before providing them to the next step in the process. For example, scheduling specific work to be done only on certain days, or completing ten documents before sending them to an editor. If completed work is passed along to the next process immediately or in small batches, the process flow becomes more efficient. You may wish to calculate or estimate batch size for the value stream map to identify waste. Reduce batch size as a strategy for process improvement.
• Cash Flow. Movement of cash into or out of an organization during a specific time period. In ITS, this would likely focus on operational cash flows; cash received or expended as a result of business activities. This is a financial measure you may wish to use to identify process concerns.
• Capacity. The ability to produce an output. It is derived from the output produced and the potential output which could be produced if the capacity were fully recognized. Collect during process discovery. This is a common value stream metric.
• Cellular Layout (aka Production Cell Layout). Put different functional performers in the same physical location. This reduces hand-off and transportation delays. Use as a strategy for process improvement.
• Continuous Flow Processing. Designing a work environment so people who provide hand-offs to others are located close to each other to avoid delay. Process work in small batches or avoid batching all together. Use as a process improvement technique when appropriate. Review throughout the maturity states.
• Defects Per Million Opportunities (DPMO). Identify specific opportunities for defects in order to eliminate defects. In an office environment, this can apply to deliverables that require correction or rework. Use this to measure process performance.
• Kaizen Events. In the service industry, it refers to activities that continually improve business functions. This is often executed as a meeting with key participants in a particular process to brainstorm improvements. Use throughout the process maturity states.
• Kanban. A scheduling system that prescribes what to produce, when, and how much. You may use Kanban cards to indicate what supplies to reorder. A Kanban card is a physical card that contains product details that can be used to order more materials when needed. Constant awareness of the demand rate is critical to this approach. Use when implementing a pull system
• Pareto charts. Chart based on Pareto’s Law: 20% of the causes contribute to 80% of the problems. A graphical technique used to quantify problems. Used to identify the “vital few” problems causing the greatest impact, so that correction effort can be focused at these, as opposed to fixing the “trivial many.”
• Pull system. A system of producing outputs based on customer requests. Execute work according to first-in/first-out prioritization. Use when there is a high degree of demand variability. Implement to reduce inventory.
• Push system. Produce according to forecasting needs. This may lead to large inventories. In an office environment, this would refer to scheduling work according to due dates, monetary value, or some specific criteria. Use when demand is fairly predictable and production variability is low.
To introduce lean, he said it’s necessary to explain up front why the change is necessary; validate the current state; clearly define the desired state; identify what is not going to change; and focus on future positives. In the transition period, repeat the desired state message again and again, provide information and answers in a variety of ways, and create safe ways to express resistance; and bury the old ways.
After it’s been implemented, show the distance people have come, communicate positive results of the desired state, acknowledge the price they have paid, and thank them for their effort and results.
“Only 10% of business leaders execute their initiatives because 95% of employees do not understand the business strategy, 75% of managers do not have incentives linked to the strategy, and 60% of the businesses do not link employee work efforts to the strategy,” he said.
The root causes of weak execution:
• Clarity of the objective (communication gap). “People didn’t understand the goal they were simply supposed to execute. One in seven (15%) could name only one of their organization’s three goals their leaders had identified. Six in seven (85%) named what they thought was the goal but often it didn’t remotely resemble what their leaders had said. The further from the top, the less clear it was.”
• Lack of commitment to the goal (buy in). “51% said they were passionate about the goal—leaving almost half of the people going through the motions.”
• Team and individual accountability. “81% of the people surveyed said they were not held accountable for regular progress on the goal. 87% had no clear idea what they should be doing to achieve the goal. What works? How do you hold your team accountable?”
Real enemies:
• The Whirlwind. “Your day job. Why? It takes a massive amount of energy to keep the day-to-day ‘urgent’ things going. Ironically, focused energy is also the very thing that makes it so hard to execute anything new. It robs you of the focus required to move strategy to execution.”
• Inertia. “The way it has always been.”
• Resistance to change.
And finally, he presented the four principles of execution:
• Focus on the most important goal—the principle of focus. “The first challenge is to bring focus to goal or initiative what’s most important. Keep it simple—that’s the point. Somewhere we have forgotten this. Then you can magnify—bring focus to—the most important goal. There’s the example of Natural Principle: The sun’s scattered rays are too weak to start a fire, but once you focus the sun’s rays with a magnifying glass, they will bring paper to flames in minutes.”
• Act on the lead measures—the principle of doing and becoming. “The activities and behavior which drive performance toward the goal. All things are not created equal. Some actions have more impact—focus here. There are two kinds of measurements. Lag measures are results like sales, profit, market share. When you receive the results, the performance that drives them is already in the past. You can’t fix it. Lead measures are activities you must do to reach the goal. It measures new behavior to drive success of the goal. Focusing on lead measures seem counter-intuitive. Most CEOs focus on the lag measures, but lead measures will get you the what you want—the lag measures.
• Keep accurate score—the principle of engagement. “People play differently when they’re keeping score. Being emotionally engaged creates the highest level of performance. The highest level of performance comes from knowing the score. It’s best when designed by team members. Keep it simple. Members can quickly identify whether they’re winning or losing. Results become important to the team when they become visual.”
• Create a consistent tempo of accountability—the money ball. “Execution actually happens at regular and frequent accountability meetings. It’s best if weekly. Members hold each other accountable for producing results, despite the whirlwind.”